Builtrites common stock is currently selling for $56 a share and the firm just paid an annual dividend of $2.50 per share. Management believes that dividends and earnings should grow at 7% annually. Since new stock would need to be sold to finance an expansion, Builtrite expects flotation costs to be 5% of the expected selling price of $56 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock?

options:

11.80%

7.94%

12.03%

8.01%