You are appointed as a finance manager of Toy Biz, which deals with a variety of toys including electronic toys, educational toys, dolls, cars, construction toys, educational toys, and others. It is a start-up firm, and your boss is keen to understand important aspects of budgeting. How will help him understand budgeting in detail?

Calculate the cost of equity capital for a company whose risk-free rate = 6%, equity market required return = 18% with a beta of 1.33.