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The capital structure of a company is composed of debt and equity as follows. Given the following information, what is the after-tax cost of equity in the capital structure? The tax rate is %30.

	Equity	Debt
# of outstanding shares	100,000	-
Stock price (each)	$85	-
Expected dividend per share	$4	-
Dividend growth rate	3%	-
# of outstanding bonds	-	5,000
Coupon rate	-	5%
Bond price (each)	-	$950
Years to maturity	-	7

Multiple Choice

A)4%.

B)7.7%.

C)5.4%.

D)3%.

E)5%.