39 Kara Zor-El has been advised that the Build Up Method is the most appropriate for determining a required rate of return for Steel, Inc. Currently, the Treasury band rate is 2.50%, the equity risk premium is 6.75%, the correlation risk premium is 5.75%, the micro-cap risk premium is 4.50%, the earnings risk premium is 3.25%, the start-up risk premium is 5.50%, and the seasonal risk premium is 3.75%. Using the Build-Up Method for determining the cost of capital, what is the required rate of return for Steel, Inc.? O A 13.75% O B. 17.00% O C. 18.25% O D. 19.25% O E. 20.50%

39 Kara Zor-El has been advised that the Build Up Method is the most appropriate for determining a required rate of return for Steel, Inc. Currently, the Treasury band rate is 2.50%, the equity risk premium is 6.75%, the correlation risk premium is 5.75%, the micro-cap risk premium is 4.50%, the earnings risk premium is 3.25%, the start-up risk premium is 5.50%, and the seasonal risk premium is 3.75%. Using the Build-Up Method for determining the cost of capital, what is the required rate of return for Steel, Inc.? O A 13.75% O B. 17.00% O C. 18.25% O D. 19.25% O E. 20.50%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 10QTD

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