QUESTION $16$

Mikkelson Corporation's stock had a required return of $10\mathrm{.}00\%$ last year, when the risk$-$free rate was $3\mathrm{.}5\%$ and the market risk premium was $4\mathrm{.}75\%.$ Then an increase in investor risk aversion caused the market risk premium to rise by $2\%.$ The risk$-$free rate and the firm's beta remain unchanged. What is the company's new required rate of return? $($Hint: First calculate the beta, then find the required return.$)$ Do not round your intermediate calculations.

a$.16\mathrm{.}5\%$

b$.12\mathrm{.}87\%$

c$.12\mathrm{.}74\%$

d$.14\mathrm{.}36\%$