The CFO of Lenox Industries hired you as a consultant to help estimate its cost of capital. You have obtained the following data: (1) r_d = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) r_RF = 5.00%, RP_M = 6.00%, and b = 1.50. (3) D₁ = $1.20, P₀ = $35.00, and g = 8.00% (constant). You were asked to estimate the cost of equity-based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference?

a. 3.00%

b. 2.61%

c. 3.72%

d. 2.67%

e. 3.54%