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You are trying to estimate the cost of equity for a privately owned cruise ship company called the Titanic Cruise Lines. You know that the

You are trying to estimate the cost of equity for a privately owned cruise ship company called the Titanic Cruise Lines. You know that the company's cost of debt is 3% and its debt-to-enterprise value ratio is 20%. You have collected the following information on publicly traded cruise lines that are comparable. You also know that the risk-free rate is 1.9% and the market risk premium in 5%.

 

What is the best estimate for the cost of equity of Titanic Cruise Lines ?

Company Name Royal Caribbean Norwegian Carnival Lindblad Equity Beta 2.7 2.72 2.23 2.46 Market Capitalization (in $ billions) 22.25 9.9 26.6 0.78 Market Value of Debt (net of excess cash) (in S billions) 16.3 8.3 18.8 0.30 Cost of Debt (in %) 4.0% 4.5% 3.9% 3.5%

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