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High Adventure is considering a new project that is similar in risk to the firm's current operations. The firm maintains a debt-equity ratio of .55 and retains all profits to fund the firm's rapid growth. How should the firm determine its cost of equity?

A. By adding the market risk premium to the after tax cost of debt

B. By mulitplying the market risk premium by 1.55

C. By using the dividend growth model

D. By using the capital asset pricing model

E. By averaging the costs based on the dividend growth model and the capital asset pricing model

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Financial Management, Finance

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