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Metrocity Inc. is a private company and interested in determining its cost of equity. Bistro Inc. is very similar to Metrocity and its stock is
- Metrocity Inc. is a private company and interested in determining its cost of equity. Bistro Inc. is very similar to Metrocity and its stock is publicly traded. Bistros common stock has a beta of 1.5 and its debt ratio is 1/3. Metrocity Inc., on the other hand, is an all-equity firm. If the expected market premium is 5% and the risk-free rate is 3%, what is Metrocitys cost of equity? (Assume debt beta is zero and that there are no corporate taxes).
- 8%
- 11%
- 15%
- 17%
- 23%
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