Butcher timber - firm's own cost of debt. What is an...

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A. Butcher Timber Company hired your consulting firm to help them estimate the cost of common equity. The yield on the firm's bonds is 8.75%, and your firm's economists believe that the cost of common can be estimated using a risk premium of 3.85% over a
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Unformatted text preview: firm's own cost of debt. What is an estimate of the firm's cost of common from retained earnings? Bond yield 8.75% Risk premium 3.85% r s = r d + Risk premium 12.60% 12.60%...
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