problem 9-6 Cost of Equity: CAPM

Cost of Equity: CAPM

Booher Book Stores has a beta of 0.5. The yield on a 3-month T-bill is 3% and the yield on a 10-year T-bond is 7.5%. The market risk premium is 4%, and the return on an average stock in the market last year was 11.5%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.