The risk free rate of return is 3% and the expected return on the market portfolio is 14%. Murphy Enterprises has a beta of 2.0 and a standard deviation of returns of 26%. Starship's marginal tax rate is 35%. Analysts expect Murphys net income to grow by 12% per year for the next 5 years. Using the capital asset pricing model, what is Murphy Enterprises' cost of retained earnings?

18.6%

21.2%

22.8%

25.0%