Below is a Statement of Financial Position for Martin Corporation:

                          Martin Corporation

                     Statement of Financial Position

                         (Dollars in millions)

Assets: 

Current Assets                                          $ 75

Plant and Equipment                                    250

Total Assets                                            $325

Liabilities and shareholders' equity:

Liabilities:  

Current Liabilities                                       $ 46

Long-term debt (12%)                                  64

Common equity:  

Common stock, $1 par

                                                       $ 10

Additional paid in capital                               100

Retained earnings                                     105

Total liabilities and shareholders' equity               $325

Additional Data:

●The long term debt was originally issued at par ($1,000 per bond) and is currently trading at $1,250 per bond.

●Martin Corporation can now issue debt at 150 basis points over U.S. treasury bonds.

●The current risk-free rate (U.S. Treasury bonds) is 7%.

●The expected market return is currently 15%.

●The beta for Martin is 1.25.

●Martin's effective corporate income tax rate is 40%.

Using the Capital Asset Pricing Model (CAPM), Martin Corporation's current cost of common equity is

A. 15.00%

B. 10.00%

C. 17.00%

D. 8.75%