problem: Suppose the CAPM or one-factor model holds, determine the cost of equity for a firm if the firm's equity has a beta of 1.2, the risk-free rate of return is 2 percent, the expected return on the market is 9 percent, and the return to the company's debt is 7 percent?
[A] 10.4%
[B] 10.8%
[C] 12.8%
[D] 14.4%
[E] None of the above.