WACC (TUFA CO.)

Hi Sir, For Question Tufa Co. Why is 0.05 used in the calculation of Cost of Equity as per below? Examiners Answer: Cost of equity Cum div share price ($ per share) 7·52 Ex div share price ($ per share) 7·07 ––––– Dividend for 20X7 ($ per share) 0·45 Dividend for 20X3 ($ per share) 0·37 Dividend growth rate (%) 5·02 [(0·45/0·37)0·25 – 1] Cost of equity (%) 11·7 [((0·45 x 1·05)/7·07) + 0·05]