The Taylor 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. Taylors 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, Taylors cost of internal equity is:

13.14%

16.60%

15.21%

13.83%