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P Daves Inc. red you as a consultant to help them estimate their cost of equity. investment bankers believe that the cost of equity can be estimated using a nsk premium o 3 of equity from retained earnings? The yield on the firms bonds is 6.5%, and Daves %. What is an estimate of Daves cost A. 10.51% B. 9.32% O C. 10.19% D. 9.50% O E. 10.33%
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Answer #1

cost of retained earning = Yield to maturity + risk premium

cost of retained earning = 6.5% + 3% =9.5%

Answer is D = 9.50%

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