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Estimate the cost of common stock capital

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The lead software engineer at SafeSoft, a food industry service corporation, has convinced the president to develop new software technology for the meat and food safety industry. It is envisioned that processes for prepared meats can be completed more safely and faster using this automated control software. A common stock issue is a possibility to raise capital if the cost of equity capital is below 9%. SafeSoft, which has a historical beta value of 1.09, uses CAPM to determine the premium of its stock compared to other software corporations. The security market line indicates that a 5% premium above the risk-free rate is desirable. If U.S. Treasury bills are paying 2%, estimate the cost of common stock capital.

Reference no: EM13882226

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