The Harrison 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. Harrisons bonds yield 10.28%, and the firms analysts estimate that the firms risk premium on its stock over its bonds is 4.95%. Based on the bond-yield-plus-risk-premium approach, Harrisons cost of internal equity is:

15.23%

16.75%

19.04%

14.47%