In financial analysis, it is important to select an appropriate discount rate. A project's discount rate must be high to compensate investors for the project's risk. The return that shareholders require from the company as a compensation for their investment risk is referred to as the cost of equity. Weghorst Co. is a 100% equity-financed company (no debt or preferred stock); hence, its WACC equals its cost of common equity. Weghorst Co.'s retained earnings will be sufficient to fund its capital budget in the foreseeable future. The company has a beta of 1.50, the risk-free rate is 5.0%, and the market return is 6.5%. What is Weghorst Co.'s cost of equity? 24.13% 16.25% 7.25% 8.75% Weghorst Co. is financed exclusively using equity funding and has a cost of equity of 13.05%. It is considering the following projects for investment next year: Each project has average risk, and Weghorst Co. accepts any project whose expected rate of return exceeds its cost of capital. How large should next year's capital budget be? $9, 825 $14, 625 $13, 500 $15, 300