Question: The Harrison Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's cost

The Harrison Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's cost of internal equity. Harrison's bonds yield 10.28%, and the firm's analysts estimate that the firm's risk premium on Its stock over its bonds is 4.95% %. Based on the bond-yield-plus-risk-premium approach, Harrison's cost of internal equity is: 15.23% 16.75% 19.04% 18.28%

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