Terrifying Rangers Inc., a manufacturer of bear spray, are evaluating a new project. They are going to invest $200,000 into a new manufacturing facility. The facility is going to be good for 4 years, there is no salvage value associated with it. The tax rate is 25%. There will be inventory of $13,000 needed which will be reclaimed by the end of the project. The capital structure of the company is 40% debt and 60% equity (common stocks). The company uses a loan and pays 7% interest rate. Risk-free rate is 4% and market risk premium is 6%. Company beta is 1.5. 

 Calculate cost of equity. Input the number in % with one decimal without the "%"

Answer rating: 100% (QA)

To calculate the cost of equity we can use the Capital Asset Pricing Model CAPM which is given by th... View the full answer