Rick Malcolm is an advisor to a board member who works at a private equity firm. He has told the CFO that sophisticated investors use a quick estimate of the cost of equity. He says that the cost of equity must be above the company's debt rate. The estimate is that 3% to 5% should be added to the company's long term interest rates. McCormick & Company estimates its current borrowing cost at 4%. Make your own estimate of the relative risk of McCormick & Company. Then calculate the Cost of equity, Rs using this own debt plus a 3% to 5% formula.

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To estimate the cost of equity for McCormick Company we need to assess its relative risk Unfortunate... View the full answer