Scanlon Inc.\'s CFO hired you as a consultant to help her estimate the cost of c
ID: 2643764 • Letter: S
Question
Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 3.25%; RPM = 5.25%; and b = 1.40. Based on the CAPM approach, what is the cost of equity from retained earnings Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 3.25%; RPM = 5.25%; and b = 1.40. Based on the CAPM approach, what is the cost of equity from retained earningsExplanation / Answer
Cost of equity using CAPM = risk free rate + beta ( market risk premium)
Cost of equity = 0.0325 + 1.4 ( 0.0525)
Cost of equity = 0.106 or 10.6%
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