Suppose That Tan Lotion's Common Shares Sell for $18 Per

Multiple Choice

Suppose that Tan Lotion's common shares sell for $18 per share, are expected to set their next annual dividend at $1.00 per share, and that all future dividends are expected to grow by 7 percent per year, indefinitely. If Tan Lotion faces a flotation cost of 12 percent on new equity issues, what will be the flotation-adjusted cost of equity?

A) 6.37 percent
B) 7.06 percent
C) 12.56 percent
D) 13.31 percent