Cristina Flores is an advisor to a board member who works at a private equity firm.She has told the CFO that sophisticated investors use a quick estimate of the cost of equity.She says that the cost of equity must logically be higher than the company's debt rate.The estimate is that 3% to 5% should be added to the company's long term interest rates. McCormick & Company estimates its current borrowing cost at 4%.Make your own estimate of the relative risk of McCormick & Company.Then, calculate the cost of equity (Rs) using this "own debt plus 3% to 5%" formula.

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