A firm is raising capital for a new project. Their outstanding bonds pay 14% interest annually. Investors currently pay $1124 for the 10-year bond. This firm plans to issue common stock. The additional risk premium on the firm's stock is 2.3%. Estimate the cost of equity capital?
Solve for the cost of equity

1. 6.51%
2. 4.21%
3. 4.99%
4. None of the other choices
5. 2.69%

Answer rating: 100% (QA)

Yield to Maturity of the 10 year Bond 1182 So A... View the full answer