Problem:

Adventure Outfitter Corp. can sell common stock for $27 per share and its investors require a 17% return. However, the administrative or flotation costs associated with selling the stock amount to $2.70 per share.

Required:

Question: What is the cost of capital for Adventure Outfitter if the corporation raises money by selling common stock?

Select one:

a. 27.00%

b. 17.00%

c. 18.89%

d. 18.33%

Note: Please provide reasons to support your answer.