The Global Advertising Co. has a tax rate of 40%. The company can raise debt at a 12% interest rate. Global's stock price is $8.59 per share and it recently issued a dividend of $0.90, which is expected to grow at a constant rate of 5%. If Global issues new common stock, the flotation cost incurred will be 10%. Global plans to finance all capital expenditures with 30% debt and 70% equity. What is Global's cost of retained earnings if it can use retained earnings rather than issue new common stock?
a. 12.22%
b. 17.22%
c. 10.33 %
d. 9.66 %
e. 16.00 %