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**A comparable firm (i.e., same industry and similar operations as our firm) has an equity beta of 1.9 and a debt-to-value ratio of 0.2. The
**A comparable firm (i.e., same industry and similar operations as our firm) has an equity beta of 1.9 and a debt-to-value ratio of 0.2. The debt of the comparable firm is risk-free. Our firm has a debt-to-value ratio of 0.1. Assuming both firms should have the same asset beta, and that our debt is also risk-free, what is a good estimate of the required return on our equity? The risk free rate is 2.9% and the equity premium is 4.4%. Give your answer in percentage to the closest basis point.
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