You are a finance intern at Chambers and Sons and they have asked you to help estimate the company's cost of common equity. You obtained the following data: D1 = $1.25; P0 = $27.50; gL = 5.00% (constant); and F = 6.00%. What is the cost of equity raised by selling new common stock?
A. 9.06%
B. 9.44%
C. 9.84%
D. 10.23%
E. 10.64%
Answer: C
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