QUESTION 36

Ronald's Fast Food just paid their annual dividend of $1.05 a share. The stock has a market price of $26 and a beta of 1.15. The return on the U.S. Treasury bond (risk-free rate) is 3 percent and the market risk premium is 7 percent. What is the cost of equity? a. 7.50 percent b. 7.60 percent c. 9.15 percent d. 11.05 percent e. 11.50 percent