J. ross and sons inc. j. ross and sons inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. the firm's current after-tax cost of debt is 6 percent, and it can sell as much debt as it wishes at this rate. the firm's preferred stock currently sells for $90 a share and pays a dividend of $10 per share; however, the firm will net only $80 per share from the sale of new preferred stock. ross expects to retain $15,000 in earnings over the next year. ross' common stock currently sells for $40 per share, but the firm will net only $34 per share from the sale of new common stock. the firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10 percent per year. refer to j. ross and sons inc. what is the firm's cost of newly issued common stock?
a. 15.5%
b. 16.5%
c. 10.0%
d. 12.5%
e. 18.0%
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