You are seeking equity investors for your start-up firm. To get an idea of what potential equity investors require as a rate of return, you decide to use the build up method. At the direction of your CFO, you gather data on three components: 1) bond yield = 4%, 2) Equity premium = 8%, and 3) a start-up premium = 6%. Your firm has a beta of 1.2 and the risk-free rate is 3%. Using the build-up method, your estimated cost of capital is closest to:

• 18%
• 15%
• 21.6%
• 23%