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XYZ Inc. hired you to help them estimate the cost of equity. The yield on the firm's bonds is 5%, and you believe that the

XYZ Inc. hired you to help them estimate the cost of equity. The yield on the firm's bonds is 5%, and you believe that the cost of equity can be estimated using a risk premium of 3.45% over a firm's own cost of debt. What is an estimate of the firm's cost of equity?

a. 9.99% b. 15.16% c. 9.45% d. 8.45% e. 12.45%

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