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The equity book value of MB Corporation is $5 million, and the market value of itscommon stock is $20 million. The market value of its risk-free debt is $5 million. The beta of the company's common stock is 1.25, and the market risk premium is 8 percent. If the Treasury bond rate is 5 percent, what is the company's cost of capital? (Assume no taxes.)A) 10%B) 13%C) 14.25% D) 15%
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