The best estimate of the cost of new common equity is

Question

Quizplus · Accepted Answer

The question does not provide any information about the company or market conditions, so we cannot use any specific models to calculate the cost of new equity. However, we can make an educated guess based on the typical range of cost of equity for companies in different industries and with different risk profiles. The typical range for cost of equity is between 8% and 15%, and the question gives us a range between 10% and 12%. Therefore, the best estimate would be somewhere in the middle of this range, which is between 11.0% and 11.2%. Choice B is the only one that falls within this range.

The Best Estimate of the Cost of New Common Equity