You are estimating the cost of equity capital for a firm and rely on the following comparable firms:

Peer Firms	Observed Beta	D/E	Tax Rate
Firm A	2.39	0.83	40%
Firm B	2.71	1.05	30%
Firm C	1.77	0.25	40%
Firm D	1.88	0.33	30%
Firm E	1.56	0.00	30%

[1 point] You know that the target D/E ratio for your firm is 0.80, and the tax rate is 30%. Further, the risk free rate is 4.00%, and the expected return on the market is 11.00%. What is the estimated cost of equity capital? [When aggregating the data, use the equally-weighted average of the peer firms].

A) 18.43% B) 14.90% C) 21.00%

[1 point] You know that the target D/E ratio for your firm is 0.80, and the tax rate is 30%. Further, the risk free rate is 4.00%, and the expected return on the market is 11.00%. What is the estimated cost of equity capital? [When aggregating the data, use the median of the peer firms].

A) 17.16% B) 21.04% C) 14.90%