Ganado and Equity Risk Premiums. Maria? Gonzalez, Ganado's Chief Financial? Officer, estimates the? risk-free rate to be 3.00 % the? company's credit risk premium is 3.60?%, the domestic beta is estimated at 1.12?, the international beta is estimated at 0.97?, and the? company's capital structure is now 50?% debt. The? before-tax cost of debt estimated by observing the current yield on? Ganado's outstanding bonds combined with bank debt is 8.30?%and the? company's effective tax rate is 42?%. Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates.
a. 8.50%
b. 7.40%
c. 5.20%
d. 4.10 %