In questions 15 to 17 suppose ABC Corporation has a capital structure consisting of 60% common equity, 10% preferred stock, and 30% debt. Assume tax rate=28%. Assume the expected rate of return for debt is 6%. Also assume the preferred stock price=$25.6, and the preferred dividend=$1. Assume Beta for ABC Corp. is 0.9. If the risk free rate=3% and Km, the return on Market basket is 8%, what is Ke, the expected rate of return on common equity?

A. 5.4%

B. 6%

C. 7.4%

D. 9.2%