Chelsea Fashions is expected to pay an annual dividend of $1.20 a share next year. The market price of the stock is $27.00 and the growth rate is 3 percent. What is the firm's cost of equity?

rev: 09_04_2018_QC_CS-136177

A. 7.13 percent

B. 7.44 percent

C. 7.32 percent

D. 7.26 percent

E. 7.49 percent