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Two companies, Cow Co. and Goat Co. are both dairy farmers who produce milk sold in supermarkets across Oklahoma. Given the nature of their business,
Two companies, Cow Co. and Goat Co. are both dairy farmers who produce milk sold in supermarkets across Oklahoma. Given the nature of their business, their operations are of essentially the same level of risk. Neither form is subject to taxation. Cow Co. is financed entirely by equity and its investors require a return of 7%. However, Goat Co. has 25% debt in its capital structure. To service this debt, Goat Co. pays 1.7%. What is Goat Co.'s cost of equity? [Enter your answer to two decimal places]
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