39 Kara Zor-El has been advised that the Build Up Method is the most appropriate for determining a required rate of return for Steel, Inc. Currently, the Treasury band rate is 2.50%, the equity risk premium is 6.75%, the correlation risk premium is 5.75%, the micro-cap risk premium is 4.50%, the earnings risk premium is 3.25%, the start-up risk premium is 5.50%, and the seasonal risk premium is 3.75%. Using the Build-Up Method for determining the cost of capital, what is the required rate of return for Steel, Inc.? O A 13.75% O B. 17.00% O C. 18.25% O D. 19.25% O E. 20.50%
39 Kara Zor-El has been advised that the Build Up Method is the most appropriate for determining a required rate of return for Steel, Inc. Currently, the Treasury band rate is 2.50%, the equity risk premium is 6.75%, the correlation risk premium is 5.75%, the micro-cap risk premium is 4.50%, the earnings risk premium is 3.25%, the start-up risk premium is 5.50%, and the seasonal risk premium is 3.75%. Using the Build-Up Method for determining the cost of capital, what is the required rate of return for Steel, Inc.? O A 13.75% O B. 17.00% O C. 18.25% O D. 19.25% O E. 20.50%
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 10QTD
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#39 Kara Zor-El has been advised that the Build Up Method is the most appropriate for determining a required rate of return for Steel, Inc. Currently, the Treasury band rate is
2.50%, the equity risk premium is 6.75%, the correlation risk premium is 5.75%, the micro-cap risk premium is 4.50%, the earnings risk premium is 3.25%, the start-up risk
premium is 5.50%, and the seasonal risk premium is 3.75%. Using the Build-Up Method for determining the cost of capital, what is the required rate of return for Steel, Inc.?
O A 13.75%
O B. 17.00%
O C. 18.25%
O D. 19.25%
O E. 20.50%
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