Gardner Electric has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 10.75%. Using the SML, what is the firm's required rate of return?

Select the correct answer.

a. 12.10%b. 12.14%c. 12.22%d. 12.26%e. 12.18%