Delta Company is headquartered in Montreal with offices in London, Paris, New York, and Tokyo. The book value of Deltas outstanding debt is $20 million. Currently, the debt is trading at 90% of book value and is priced to yield 12%. The 2 million outstanding shares of Delta stock are selling for $30 per share. Delta Company has a beta of 1.3. The current risk-free rate is 7.5%, and the market risk premium (MRP) is 7%. The tax rate is 30%.

Q14. What is Deltas estimated cost of equity? a. 15.00%. b. 16.60%. c. 17.96%. d. 18.75%. e. none of the above