The company Structured Inc. has determined that its capital structure is as follows: 35% long-term debt 15% preferred shares 50% common shares You can raise funds by issuing bonds to be sold at their par value, with an 8% coupon and a maturity of 15 years. The tax rate is 35%. You can also issue preferred shares. They are currently selling for $ 60 / share, with annual dividends of $ 6 / share. You can raise funds by issuing common stock, which would sell for $ 40 / share.

The expected dividend would be $ 5 and the projected constant growth rate is 3%. Determine the cost of issuing common shares.

Select one:

a. 3%

b. 10%

c. 15.5%

d. 12.5%