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Ottawa Caf is a small, privately owned restaurant chain, where the owner has all of her wealth invested in the business. The unlevered beta for
Ottawa Caf is a small, privately owned restaurant chain, where the owner has all of her wealth invested in the business. The unlevered beta for publicly traded restaurant chains is 1.5000 and average Rsquared of the market regressions for these companies is 55.5000%. If Ottawa Caf has no debt, what is the cost of equity for Ottawa Caf's owner? (The risk-free rate is 3.75% and the equity risk premium is 5.25%)
Question options:
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a) | 14.32% |
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b) | 20.13% |
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c) | 17.94% |
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d) | 12.80% |
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e) | 6.77% |
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