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ABC Corporation has a beta of 1.31 and a standard deviation of 15.9 percent. The market...

ABC Corporation has a beta of 1.31 and a standard deviation of 15.9 percent. The market rate of return is 13.6 percent and the risk-free rate is 3.5 percent. What is the cost of equity for the firm?

Group of answer choices

15.55 percent

16.23 percent

14.56 percent

16.73 percent

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Answer #1

Based on CAPM model, cost of equity can be calculated as Ry +B[E(Rm) - Rr]. We are given Rs = 3.5%, E(Rm) = 13.6% and B = 1.3

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