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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.

Basic Finance, Finance

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