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 percent,and the return on the market is 8 percent.Flotation costs for new equity are 5 percent.The tax rate is zero.The appropriate cost of capital is:

Question

Quizplus · Accepted Answer

K = 2% + 1.4*(8% - 2%)= 10.40%

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