Baxter International Inc. can obtain funds for future investments through retained earnings, new issues of common stock, and issuance of debt. Baxter's stock currently sells for $18 per share, paid a dividend of $1.20 last year (D₀=$1.20), has a growth rate of 6% that is expected to continue, and new issues carry flotation costs of 7%. Baxter's bonds sell for $945, pays a 7% annual coupon, matures in 30 years, and new issues carry 3% flotation costs. Baxter's tax rate is 30%. What is Baxter's cost of new common stock?

a. 6.76%

b. 6.06%

c. 12.67%

d. 13.07%

e. 13.60%