Ch.12 TBQ has a market capitalization of $19.7 million, and $5.3 million in outstanding debt. Suppose their beta is 1.4, the risk-free rate is 2%, and the expected return of the market is 6%. TBQs debt cost of capital is 5% and their corporate tax rate is 30%. What is the TBQs equity cost of capital?

Select one:

a. 5.6%.

b. 6.73%.

c. 7.6%.

d. 9.2%.

e. 3.5%.