1. Roadrunner Bearing Company is an all-equity firm (i.e. it has no debt financing) with a beta of 1.6. If the risk-free rate is 2.5% and the market risk premium is 10%, what is the cost of equity capital for Roadrunner Bearing Company?
2. Sylvester’s Plumbing is an all-equity firm with a beta of 1.3. If the risk-free rate is 2.75% and the expected market return is 13.5%, what is the cost of equity capital for Sylvester’s Plumbing?