Homework Corp. has a target capital structure of 30% debt, 60% common equity, and preferred stock of 10%. The yield to maturity on the company's outstanding bonds is 9%, and its tax rate is 21%. The cost of preferred stock is 5%. Homework's CFO estimates that the company's WACC is 9.96%. What is Homework's cost of equity?

a)

7.11%

b)

60.00%

c)

9.96%

d)

12.21%