The Abacus Computer Company has decided to use the Capital Asset Pricing Model to estimate its cost of equity.The firm's beta was estimated at 1.4.The S&P/TSX Composite-stock index has returned 12.5% to investors over a fairly long period of time,and Abacus has decided to use this value as the market return.Treasury bills are currently providing investors with a 6.5% yield.
A)Calculate Abacus's cost of equity using the CAPM.
B)If its beta was incorrectly estimated,and a new revised estimate of 1.8 was used in the calculations,what would its new estimate of the cost of equity be?

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The Answer of The Abacus Computer Company has decided to use the Capital Asset Pricing Model to estimate its cost of equity.The firm's beta was estimated at 1.4.The S&P/TSX Composite-stock index has returned 12.5% to investors over a fairly long period of time,and Abacus has decided to use this value as the market return.Treasury bills are currently providing investors with a 6.5% yield.

The Abacus Computer Company Has Decided to Use the Capital