Cost of common stock: Two-Stage Rocket’s common stock just paid an annual dividend equal of $1.05 and it is commonly known that the firm expects dividends paid to increase by 9.50 percent for the next two years and by 2 percent thereafter. If the current price of Two-Stage’s common shares is $10.40, then what is the cost of common equity capital for the firm?
(Omit the percent sign in your answer. Carry out all calculations to four decimal places and round your final answer to two decimal places, for example 7.80%.)
Cost of common equity = %