The current risk$-$free rate of return $(r_{RF})$ is $3\mathrm{.}86\%$ while the market risk premium is $5\mathrm{.}75\%.$ The Alfen Company has a beta of $0\mathrm{.}78.$ Using the capital asset pricing model $($CAPM$)$ approach, Allen's cost of equity is

$\backslash$table$[[$The cost of equity using the bond yield plus risk premiun,$8\mathrm{.}35\%,4],[,8\mathrm{.}7675\%,],[$The Kennedy Company is closely held and, therefore, cannot g$,9\mathrm{.}185\%,$ble inputs with which to use the CAPM method for estimating a company's$],[$cost of internal equity. Kennedy's bonds yield $10\mathrm{.}28\%,$ and the,,sts estimate that the firm's risk premium on its stock over its bonds is$],[55\%.$ Based on the bond$-$yield$-$plus$-$risk$-$premi,$10\mathrm{.}02\%,$pst of internal equity is:$]]$