The Down and Out Co. just issued a dividend of $2.16 per share on its common stock. The company is expected to maintain a constant 4 percent growth rate in its dividends indefinitely. If the stock sells for $40 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)

rev: 09_20_2012

Multiple Choice

• 9.4%

• 5.72%

• 10.1%

• 9.14%

• 9.62%