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What is the cost of new stock

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Right Inc.'s common stock currently sells for $34.00 per share, the company expects to earn $2.50 per share by the end of the current year, its expected dividend payout ratio is 30% and its expected constant growth rate is 6.00%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What is the cost of new stock? Right tax rate is 40%.

A) 6.98%

B) 9.24%

C) 8.45%

D) 12.48%

E) 7.49%

(PLEASE SHOW WORK ON HOW ANSWER WAS SOLVED)

Reference no: EM131473302

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