ABC Company has publicly traded $1,000 par value, 5% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $1015. The company also has preferred stock with a $70 par and 5% annual dividend. The market has priced the preferred stock at $79. ABCs common stock has a beta of 1.6. You estimate the risk-free rate to be 3% and the required return on the market to be 13%. The companys average tax rate is 30%.

What is the cost of the companys common stock?

A. 20.5%

B.21.6%

C. 18.7 %

D. 19.0 %