The following financial information is available on Rawls Manufacturing Company:

Current (t=0) market price of common shares: $48.00 Current (t=0) dividend per share: $3.50 Expected long-term constant dividend growth rate: 5.00%

Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach.

12.7%

12.6%

13.4%

14.4%