The risk-free rate of return is 2.5% and the market risk premium is 8%. Rogue Transport has a beta
of 2.2 and a standard deviation of returns of 28%. Rogue Transport's marginal tax rate is 35%.
Analysts expect Rogue Transport's dividends to grow by 6% per year for the foreseeable future.
Using the capital asset pricing model, what is Rogue Transport's cost of retained earnings?
A) 17.7% B) 20.1% C) 16.4% D) 19.6%
B
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