Suppose That Wave Runners' Common Shares Sell for $35 Per

Multiple Choice

Suppose that Wave Runners' common shares sell for $35 per share, are expected to set their next annual dividend at $2.00 per share, and that all future dividends are expected to grow by 10 percent per year, indefinitely. If Wave faces a flotation cost of 15 percent on new equity issues, what will be the flotation-adjusted cost of equity?

A) 6.73 percent
B) 10.07 percent
C) 15.71 percent
D) 16.72 percent