Rick Malcolm is an advisor to a board member who works at a private equity firm.He has told the CFO that sophisticated investors use a quick estimate of the cost of equity.He says that the cost of equity must be above the company's debt rate.The estimate is that 3% to 5% should be added to the company's long term interest rates. McCormick & Company estimates its current borrowing cost at 4%.Make your own estimate of the relative risk of McCormick & Company.Then calculate the Cost of equity, rs using this own debt plus a 3% to 5% formula.

Discussthe best estimates of McCormick & Company's capital structure used for the acquisition of new product lines.Can you assist and give some guidance to this question? I am not quite understanding what is being asked.