14. Susan is starting her food truck business and her cost of equity can be...
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14. Susan is starting her food truck business and her cost of equity can be estimated using the Capital Asset Pricing model. The T-bill rate is at 2% and the market rate is at 12%. Since this is a brand-new venture, the risk is pretty high, so it has a beta of 1.5 . What is Susan's cost of equity? A. 14% B. 15% C. 16% D. 17% 15. Jeremy finances his new venture of a limited-service hotel with an $8M bank loan and $10M raised from private equity. He is very proud of putting this deal together because the loan was only at 6% and his investors expects a return of 12%. Assuming that the applicable tax rate is 30%, what is Jeremy's weighted average cost of capital? A. 8.53% B. 6.67% C. 4.2% D. 1.87%
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