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Question(s) / Instruction(s):

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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