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The market value of Exxon Corporation's common stock is $40 million and the market value of its risk-free debt is $60 million. The firm's stock

The market value of Exxon Corporation's common stock is $40 million and the market value of its risk-free debt is $60 million. The firm's stock is currently trading at $32 and has just paid a dividend of $4.0 per share which is expected to growth at 3% forever. If the Treasury bill rate is 6 percent, what is the firm's cost of capital? (Assume no taxes.)

a. 9.95

b 15.50

c 7.46.

d 13

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