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The Best Health (BH) is a for-profit corporation, with a corporate tax rate of 30%. It's a zero-growth company, with expected operating income of $500,000.

The Best Health (BH) is a for-profit corporation, with a corporate tax rate of 30%. It's a zero-growth company, with expected operating income of $500,000. BH uses $1 million debt at a 10% financing cost, and the cost of equity of an unleveraged firm in the same risk class is 15%. What is the cost of levered BH equity?

a.

30%

b.

17%

c.

15%

d.

10%

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