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The common stock of BG Company has a beta of .9. The risk-free rate is 6 percent and the market risk premium (RPM) is 5

The common stock of BG Company has a beta of .9. The risk-free rate is 6 percent and the market risk premium (RPM) is 5 percent. Assume the firm will be able to use retained earnings to fund the equity portion of its capital budget. What is the companys cost of retained earnings, rs?

a. 8.5%

b. 11.5%

c. 12.3%

d. 13.0%

e. 13.7%

THE ANSWER IS NOT 10.5!!!!!!

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