Builtrites common stock is currently selling for $86 a share and the firm just paid an annual dividend of $3.70 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 $86 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock?

Group of answer choices

11.85%

11.26%

11.53%

12.64%