Computation of Brisbane Rental's Cost of Equity Capital using CAPM:

Cost of Equity Capital = Risk-free Rate + Beta * Market Risk Premium

= 8% + 0.90 * 7%

= 8% + 6.30%

Cost of Equity Capital = 14.30%

Computation of Brisbane Rental's Cost of Equity Capital using Dividend Growth Model:

Cost of Equity Capital = Last Year Dividend*(1+Growth Rate)/Current Market Price + Growth Rate

= $1.80*(1+7%)/$25 + 7%

= $1.926/$25 + 7%

Cost of Equity Capital = 14.70%

Average Cost of Equity Capital = (Cost of Equity Capital using CAPM + Cost of Equity Capital using Dividend Growth Model)/2

= (14.30%+14.70%)/2

Average Cost of Equity Capital = 14.50%