A company's common stock has a market value of $94.37 per share and its next dividend is expected to be $7.27 per share. The stock's beta is 1.35 and the expected market return is 12.1% per year. The company's dividends are expected to grow forever at a constant rate of 8.1% per year and the tax rate is 39%. If the flotation costs for common stock are 9%, what is the company's annual cost of common stock financing?

Question 7 options:

1)

15.4%

2)

14.7%

3)

15.9%

4)

14.3%

5)

16.6%