It's the start of 2020. For the year just ended, a firm had revenue of $3.5 billion, EBIT of $700 million, depreciation of $150 million and capital expenditures of $180 million. Net working capital is 4% of revenue. The tax rate is 20%. The firm has 200 million shares of equity priced at $40 per share. The firm also has $2.5 billion in debt on the balance sheet, trading at 90% of book value, yielding 6%. Treasurys yield 2%, the market risk premium is 8% and the firm's beta is 1.10. Starting in 2020, the firm will grow at 3% per year for the foreseeable future. 5. What is the appropriate cost of capital? (a) (b) (C) (d) 9.48% 10.42% 10.80% 9.37%