You are trying to estimate the cost of equity for a privately owned cruise ship company called the Titanic Cruise Lines. You know that the company's cost of debt is $3\%$ and its debt$-$to$-$enterprise value ratio is $20\%.$ You have collected the following information on publicly traded cruise lines that are comparable. You also know that the risk$-$free rate is $1\mathrm{.}9\%$ and the market risk premium in $5\%.$ What is the best estimate for the cost of equity of Titanic Cruise Lines $?$ Select one.

$($hint: Use the average unlevered cost of capital of the other cruise ship companies to calculate the cost of equity for Titanic Cruise Lines $)$

Company Name Equity Beta

Market Capitalization

$($in $ billions$)$

Market Value of Debt

$($net of excess cash$)($in $ billions$)$

Cost of Debt

$($in $\%)$

Royal Caribbean $2\mathrm{.}722\mathrm{.}2516\mathrm{.}34\mathrm{.}0\%$

Norwegian $2\mathrm{.}729\mathrm{.}98\mathrm{.}34\mathrm{.}5\%$

Carnival $2\mathrm{.}2326\mathrm{.}618\mathrm{.}83\mathrm{.}9\%$

Lindblad $2\mathrm{.}460\mathrm{.}780\mathrm{.}303\mathrm{.}5\%$

I.

$14\mathrm{.}54\%$

II$.$

$12\mathrm{.}24\%$

III.

$10\mathrm{.}39\%$

IV$.$

$15\mathrm{.}81\%$