The appropriate risk-free rate to use when calculating the cost of equity for a firm is

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The appropriate risk-free rate to use when calculating the cost of equity for a firm is a long-term Treasury rate because it reflects the time horizon of equity investors who are looking for long-term returns. Short-term rates may be appropriate for short-term investments, but equity investments are generally expected to have a longer time horizon. A 50/50 mix of short-term and long-term rates may be appropriate in some cases, but it depends on the specific circumstances of the firm and its investors.

The Appropriate Risk-Free Rate to Use When Calculating the Cost