Suppose That Beach Blanket's Common Shares Sell for $55 Per

Multiple Choice

Suppose that Beach Blanket's common shares sell for $55 per share, are expected to set their next annual dividend at $3.00 per share, and that all future dividends are expected to grow by 8 percent per year, indefinitely. If Beach faces a flotation cost of 10% on new equity issues, what will be the flotation-adjusted cost of equity?

A) 5.45%
B) 8.06%
C) 13.45%
D) 14.06%