McKinsey and Sons has a target capital structure that calls for 50% debt, 10% preferred stock, and 40% common equity.

The firm can issue new 10 year debt with an annual coupon of 9% for

$968.606.

The firm is in a 35% tax bracket.

The firm's preferred stock sells for $80 per share and pays a dividend of

$10 per share; however, the firm will only net $77 per share on the sale of new preferred stock.

The firm's common equity sells for $45 per share. The firm recently paid a dividend of $2.00 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 11% per year.

What is the cost of common stock?