Finance Quiz
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A private company, BuildCo, wants to estimate its cost of equity. It has identified a publicly traded comparable company, ConstructInc, which has an equity beta of 1.5, a debt-to-equity ratio of 0.8, and a tax rate of 30%. BuildCo has a target debt-to-equity ratio of 0.5 and the same tax rate. If the risk-free rate is 4% and the market risk premium is 6%, what is the estimated cost of equity for BuildCo?
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