12-2 Sierra Corporation has just paid a dividend of $2 per share, and its dividends are expected to grow at a steady rate of 6% for the foreseeable future. The firm’s shares are currently selling for...

Sierra Corporation has just paid a dividend of $2 per share, and its dividends are expected to grow at a steady rate of 6% for the foreseeable future. The firm’s shares are currently selling for $30 per share, with an equity beta of 1.2. The risk-free rate is 5% and expected market return is 12%. What is the firm’s estimated cost of equity if we were to calculate it as the average of the costs of equity from the dividend growth model and the security market line?