7. Valley Imports Inc has the following financial information available.

Risk-free rate of return = 4.00% Market rate of return = 13%

Before Tax Cost of debt = 7.50% Tax rate = 40%

Debt/Total Value (i.e., D/V) = 30% Beta = 1.40

What is Valley Imports cost of equity?

a. 12.6%

b. 16.6%

c. 11.62%

d. 4.98%