Oval Inc Has Just Paid a Dividend of $1

Multiple Choice

Oval Inc. has just paid a dividend of $1.50 per share on its common stock, and it expects this dividend to grow by 4 percent per year, indefinitely. The firm plans to issue common stock at $16. The firm's investment bankers believe that new issues of common stock would have a flotation cost equal to 4 percent of the current market price. Which of the following is the cost of newly issued common stock? (Round off the answer to two decimal places.)

A) 14.16 percent
B) 10.15 percent
C) 15.36 percent
D) 13.80 percent
E) 16.92 percent