The Saguenay Tourism Company is an all-equity company and is able to fund a $1 million investment using cash.The company has a beta of 1.4, the risk-free rate is 2%, and the return on the market is 8%.After-tax flotation costs for new equity are 5%.The appropriate cost of capital is:

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The appropriate cost of capital is 10.95%. This is calculated using the formula:Cost of capital = Risk-free rate + Beta * (Return on the market - Risk-free rate)Cost of capital = 2% + 1.4 * (8% - 2%)Cost of capital = 2% + 1.4 * 6%Cost of capital = 2% + 8.4%Cost of capital = 10.4%After-tax flotation costs for new equity are 5%. This means that the cost of capital is increased by 5% to 10.95%.

The Saguenay Tourism Company Is an All-Equity Company and Is