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Suppose a capital market is perfect. The levered Beta of a common stock is assumed to be 1.5. The risk-free rate is assumed to be

Suppose a capital market is perfect. The levered Beta of a common stock is assumed to be 1.5. The risk-free rate is assumed to be 4%. The expected market risk premium is assumed to be 6%. The debt-to-equity ratio is 0.5. We assume the Beta of debt is zero. What is the cost of unlevered equity for this stock?

A. 13%

B. 8%

C. 10%

D. 6%

E. Not be able to calculate the number

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