Question: Suppose you must estimate the cost of equity for a firm, and you have the following data: rre = 5.5%; rM - PRE = 6%;

Suppose you must estimate the cost of equity for a firm,

Suppose you must estimate the cost of equity for a firm, and you have the following data: rre = 5.5%; rM - PRE = 6%; b = 0.8; D1 $1.00; Po = $25.00; g = 6%; and rd = the firm's bond yield = 6.5%. What is this firm's cost of equity using the bond-yield- plus-risk-premium approach? Use a 4.5% judgmental risk premium in your calculation. 9% 11% 10.3% 10.5% 10%

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