Answer:
The correct answer is 7.775%.
Explanation:
The risk-free rate is given at 4.10%.
The market risk premium is 5.25%.
Beta is given at 0.70.
Based on the CAPM approach the cost of equity from retained earnings will be
=Risk free rate+beta(market risk premium)
=0.041+0.7*0.0525
=0.041+0.03675
=0.07775
So, the cost of equity from retained earnings is 7.775%.
