To help estimate its cost of common equity, Maxwell and Associates recently hired you. You have obtained the following data: D0 = $0.90; P0 = $27.50; and gL = 7.00% (constant). Based on the dividend growth model, what is the cost of common from reinvested earnings?
A. 9.29%
B. 9.68%
C. 10.08%
D. 10.50%
E. 10.92%
Answer: D
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