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The cost of equity using the bond yleld plus risk premlum approach The Kennedy Company is closely held and, therefore, cannot generate rellable inputs with which to use the CAP.M method for estimating a company's cost of internal equity. Kennedy's bonds yield 10.28%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 5.89. Based on the bond-yield-plus-risk-premium approach, Kennedy's cost of internal equity is: 20.21% 19.40% 17.79% 16.17%