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Question: Cost of Equity: DCF

Summerdahl Resorts' common stock is currently trading at $38 a share. The stock is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75), and the dividend is expected to grow at a constant rate of 4% a year. What is the cost of common equity? Round your answer to two decimal places.

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