A company issues bonds that yield 8.75% to investors with a after-tax cost of debt of 6.1%.

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A company issues bonds that yield 8.75% to investors with a after-tax cost of debt of 6.1%. Economists estimate the judgmental risk premium at 8.65%.

What is an estimate of the company's cost of common equity?

a. 12.59%

b. 13.10%

c. 14.63%

d. 15.60%

e. 17.40%

Related Book For answer-question

Foundations of Financial Management

ISBN: 978-1259024979

10th Canadian edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

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Posted Date: Sep 11, 2020 11:21 PM

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A company issues bonds that yield 8.75% to investors with a after-tax cost of debt of 6.1%.

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Expert Answer:

The answer is option e 1740 Estim... View the full answer

Foundations of Financial Management

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