7. Mersaco Inc. has a weighted average cost of capital of 11.5 percent. Its target capital structure is 55 percent equity and 45 percent debt. The company has sufficient retained earnings to fund the equity portion of its capital budget. The before-tax cost of debt is 9 percent, and the company's tax rate is 30 percent. If the expected dividend next period (D1) is $5 and the current stock price is $45, what is the company's growth rate? * O a. 2.68% b. 3.44% C. 4.64% O d. 6.75 e. None of the above 8. A company just paid a $2.00 per share dividend on its common stock (DO =$2.00). The dividend is expected to grow at a constant rate of 7 percent per year. The stock currently sells for $42 a share. If the company issues additional stock, it must pay its investment banker an issuance cost of $1.00 per share. What is the cost of external equity, re? a. 11:67% b. 11.88% c. 12.22% d. 11.98 e. None of the above