I've got this! The key is recognizing that the dividend yield is 0.20 / 1.80 = 11.1%, and the growth rate is 4.5%. So the cost of equity must be 11.1% + 4.5% = 15.6%, which is option B.
I'm a bit unsure here. Is the baseline against which metrics are evaluated the most crucial part, or is it the knowledge required to analyze each issue? I'll have to think this through carefully.
Jules
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