The Delta Co. owns retail stores that market home building supplies. Largo, Inc. builds single-family homes in residential developments. Delta has a beta of 1.22 and Largo has a beta of 1.34. The riskfree rate of return is 4 percent and the market risk premium is 6.5 percent. What should Delta use as their cost of equity if they decide to purchase some land and create a new residential community?

A.

12.32 percent

B.

11.93 percent

C.

12.57 percent

D.

12.71 percent

E.

12.43 percent