A stock's beta is 0.74, the tax rate is 31%, and the risk-free interest rate...
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A stock's beta is 0.74, the tax rate is 31%, and the risk-free interest rate is 3.2% per year. The company's common stock has a market value of $85.76 per share and its next dividend is expected to be $6.04 per share. The yield to maturity for the company's long-term debt is 6.8% per year. If the riskiness of the company's equity requires that it provide a risk premium of 5.7% per year over the yield on its long- term debt, what is the company's annual cost of retained earnings financing? 1) 13.4% 2) 13.1% 3) 12.5% 4) 14.2% 5) 14.5%
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