ADK Industries Common Shares Sell for $60 Per Share

Multiple Choice

ADK Industries common shares sell for $60 per share. ADK expects to set their next annual dividend at $3.75 per share. If ADK expects future dividends to grow at 9% per year, indefinitely, the current risk-free rate is 4%, the expected rate on the market is 11%, and the stock has a beta of 1.5, what should be the best estimate of the firm's cost of equity?

A) 15.25%
B) 14.50%
C) 14.88%
D) 15.03%