Bloomingdale Inc.is undertaking a capital budgeting analysis.The firm's beta is 1.5.The rate on 10-year T-Bonds is 1.6% and the return on the S&P 500 index is 8%.What is the appropriate cost of common equity in determining the firm's cost of capital?
A) 12.0%
B) 11.2%
C) 13.6%
D) 9.6%
Correct Answer:
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