ABC Inc.'s current (target) capital structure has a target debt ratio (D/TA) of 50 percent. The firm can raise up to $5 million in new debt at a before-tax cost of 8 percent. If more debt is required, the initial cost will be 8.5 percent, and if more than $10 million of debt is required, the cost will be 9 percent. Net income for the previous year was $10 million, and it is expected to increase by 10 percent this year. The firm expects to maintain its dividend payout ratio of 40 percent on the 1 million shares of common stock outstanding. If it must sell new common stock, it would encounter a 10 percent flotation cost on the first $2 million, a 15 percent cost if more than $2 million but less than $4 million is needed, and a 20 percent cost if more than $4 million of new outside equity is required. ABC's tax rate is 30 percent, and its current stock price is $88 per share. If the firm has an unlimited number of projects which will earn a 10.10 percent return, please answer the following questions. What is the cost of retained earnings (hint: P0 = $88, D1 = D0 =$4.4 million, g = 0.10)?

Group of answer choices: 11% 12% 13% 14% 15%