The Lincoln 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. Lincolns bonds yield 11.52%, 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, Lincolns cost of internal equity is:

20.59%

15.65%

16.47%

18.12%