Softball Corp. has proposed an expansion of its current business within the scope of the company's current product lines. It funds itself 40% through debt, 45% through common stock and 15% through preferred stock. They have a zero-coupon bond maturing in 14 years that sells for $437.08 (their cost of debt is compounded semi-annually). Their preferred stock pays a dividend of $2.60 and sells for $32.50. Softball's common stock beta is 1.43, the market risk premium is 7.6% and Treasury bills offer a 1% return. Softball Corp.'s marginal tax rate is 21%.

What is Softball Corp.'s cost of common equity?

Answer rating: 100% (QA)

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