The Adams Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a companys cost of internal equity. Adamss bonds yield 10.28%, and the firms analysts estimate that the firms risk premium on its stock over its bonds is 3.55%. Based on the bond-yield-plus-risk-premium approach, Adamss cost of internal equity is:

13.83%

13.14%

17.29%

16.60%