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.