Question

Martha’s Pancake House, Inc. just paid its annual dividend of $0.80 a share. The stock has a market price of

$13.00 and a beta of 1.04. The return on U.S. Treasury bills is 2.5 percent and the market risk premium is 7.3 percent. What is Martha’s cost of equity?<table><tbody><tr><td> </td> <td> </td> <td> 9.89 percent </td> </tr><tr><td> </td> <td> </td> <td> 10.09 percent </td> </tr><tr><td> </td> <td> </td> <td> 10.37 percent </td> </tr><tr><td> </td> <td> </td> <td> 10.65 percent </td> </tr><tr><td> </td> <td> </td> <td> 11.02 percent </td> </tr></tbody></table>

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