The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)

Assets 2016

Cash and securities $2,145

Accounts receivable 8,970

Inventories 12,480

Total current assets $23,595

Net plant and equipment $15,405

Total assets $39,000

Liabilities and Equity Accounts payable $7,410

Accruals 4,290

Notes payable 5,460

Total current liabilities $17,160

Long-term bonds $7,800

Total liabilities $24,960

Common stock $5,460

Retained earnings 8,580

Total common equity $14,040

Total liabilities and equity $39,000

Income Statement (Millions of $)

2016

Net sales $58,500

Operating costs except depreciation 54,698

Depreciation 1,024

Earnings before interest and taxes

(EBIT)$2,779

Less interest 829

Earnings before taxes (EBT) $1,950

Taxes 683

Net income $1,268

Other data:

Shares outstanding (millions) 500.00

Common dividends (millions of $) $443.63

Int rate on notes payable & L-T bonds 6.25%

Federal plus state income tax rate 35%

Year-end stock price $30.42

Refer to Exhibit 4.1. What is the firm's ROE? Do not round your intermediate calculations.

a. 9.03% b. 7.58% c. 7.49% d. 7.76% e. 10.02%