Butcher Timber Company Hired Your Consulting Firm to Help Them

question 60

Multiple Choice

Butcher Timber Company hired your consulting firm to help them estimate the cost of common equity.The yield on the firm's bonds is 8.75%, and your firm's economists believe that the cost of common can be estimated using a risk premium of 3.85% over a firm's own cost of debt.What is an estimate of the firm's cost of common from retained earnings?

• A)12.60%
• B)13.10%
• C)13.63%
• D)14.17%
• E)14.74%

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