Refer to Lancaster Engineering Inc. (LEI) information below, what is LEIs cost of common equity? (Hint: DCF method as illustrated on PowerPoint slide 10-18) (Note: Keep your answer. There are two other related questions.)

Use the following information for the three questions referring to Lancaster Engineering Inc. (LEI):

Lancaster Engineering Inc. (LEI) has the following capital structure:

Debt 25%

Preferred stock 15%

Common Equity 60%

LEIs corporate income tax rate is 40%. Investors expect LEIs dividend to grow at a constant rate of 9% in the future. LEI has just paid a dividend of $3.60 per share (D₀), and its common stock currently sells at a price of $54 per share. LEI can issue new preferred stock, with annual dividend of $11, at a price of $95 per share. LEI can also issue new corporate bond with yield to maturity, 12%.

	A.	6.67%
	B.	9.00%
	C.	15.67%
	D.	16.27%
	E.	7.27%