The Third Cup Company has just paid a dividend of $3 per share. The dividends are expected to grow at a rate of 4 percent per year forever. The current stock price is $25 per share. The firm faces a tax rate of 40 percent and flotation costs of 5% on new stock issues. The cost of equity for internal funds is:

	a) 9.89%
	b) 10.12%
	c) 16.48%
	d) 16.87%