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A firm has a current beta of 1.08. The market risk premium is 7.90% and the risk-free rate of return is 3.20%. By how much

A firm has a current beta of 1.08. The market risk premium is 7.90% and the risk-free rate of return is 3.20%. By how much will the cost of equity increase if the company expands its operations such that the company beta rises to 1.16?

a. .63%

b. 3.12%

c. .88%

d. 2.60%

e. 3.83%

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