In December 1995, Boise Cascades stock had a beta of 0.95. The Treasury bill rate at the time was 5.8%, and the Treasury bond rate was 6.4%. The firms had debt outstanding of $1.7 billion and a market value of equity of $1.5 billion; the corporate marginal tax rate was 36%. The historical risk premium for stocks over Treasury bills is 8.5% and the risk premium for stocks over Treasury bonds is 5.5%.

1. Estimate the expected return on the stock for a short-term investor in the company.
2. Estimate the expected return on the stock for a long-term investor in the company.
3. Estimate the cost of equity for the company.