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Question(s) / Instruction(s):

9. P. Lange Inc. hired your consulting firm to help them estimate the cost of equity. The yield on Lange's bonds is 7.25%, and your firm's economists believe that the cost of equity can be estimated using a risk premium of 3.50% over a firm's own cost of debt. What is an estimate of Lange's cost of equity from retained earnings? a. 10.75% b. 11.18% c. 11.63% d. 12.09% e. 12.58%

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