The cost of equity using the bond yield plus risk premium approach 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 11.52%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 5.89. Based on the bond-yield-plus-risk-premium approach, Harrison's cost of internal equity is: 19.15% O 17.41% O20.89% O 21.76%

The cost of equity using the bond yield plus risk premium approach 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 11.52%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 5.89. Based on the bond-yield-plus-risk-premium approach, Harrison's cost of internal equity is: 19.15% O 17.41% O20.89% O 21.76%

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Description: The cost of equity using the bond yield plus risk premium approachThe Harrison Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company'scost of internal equity. Harrison's bo

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 11P: The Rivoli Company has no debt outstanding, and its financial position is given by the following...

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