Gen X is a company and has the following assumptions:
-has a current dividend of $3 and plans to pay a dividend of $3.24 next year.
-expects the dividend to increase by 8% each year.
- current share price is $50.
-cost of debt before taxes is 12%.
-marginal tax rate is 30%.
- flotation costs are 7% of newly issued equity.
Calculate the cost of externally generated equity for Gen X.
a)15.0%
b) 15.5%
c) 10.5%