Your firm is planning to invest in a new electrostatic power generation system. Electrostat Inc is a firm that specializes in this business. Electrostat has a stock price of $25 per share with 16 million shares outstanding. Electrostat's equity beta is 1.18. It also has $220 million in debt outstanding with a debt beta of 0.08. If the

riskfree

rate is 3%, and the market risk premium is 6%, then your estimate of your cost of capital for electrostatic power generators is closest to:

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Part 1

A.

7.50%.

B.

7.75%.

C.

10.10%.

D.

9.50%.

Please answer. Thank you!