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Kinslow Manufacturing Company paid a dividend yesterday of $2.50 per share. The dividend is expected to grow at a constant rate of 5% per year. The price of Kinslow's common stock today is $25 per share. If Kinslow decides to issue new common stock, flotation costs will equal $2.00 per share. Keys' marginal tax rate is 34%. Based on the above information, the cost of new common stock is:

a. 15.00%

b. 16.41%

c. 10.55%

d. 15.50%

Basic Finance, Finance

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