Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 0.70. Based on the CAPM approach, what is the cost of equity from retained earnings?
A. 9.25%
B. 7.00%
C. 8.47%
D. 7.08%
E. 7.78%
Answer: E
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