You have the following information for a Croatian company Revenue (Croatian Kuna) CDS spread Standard Dev of gov't bond Standard Deviation of Stock Market EU (excluding Croatia) 200 0.5% 6% 10% South-eastern Europe 300 4% 12% 16% Croatia 500 3% 15% 20% German Euro bond rate = 1%. Croatian Gov't Bond, in local currency Kuna has a rate of 7%. Kuna's credit rating is 2%, the same as implied by the CDS spread.

Estimate the cost of equity for this company if a mature market such as US or Germany has an ERP of 6% and its beta=1.8. a. 21.58% b. 17.66% c. 12.26% d. 15.69%