The Down and Out Co. just issued a dividend of $2.91 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $40 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)
a) 13.71%
b) 7.86%
c) 14.4%
d) 13.03%
e) 13.27%