Cost of Equity Capital Common stock issued by Meggitt Sensing Systems paid stockholders an initial dividend of $0.93 per share on an average price of $18.80 last year. The company expects to grow the dividend rate at a maximum of 1.5% per year. The stock volatility is 1.19, and other stocks in the same industry are paying an average of 4.95% per year dividend. US Treasury bills are returning 2.0%. Determine Meggitt's cost of equity capital last year using (a) the dividend m ethod, and (b) the CAPM. (c) To what amount could the initial year dividend have decreased before the CAPM estimate would have exceeded the dividend method estimate?