An analyst has collected data about Conyers Inc. and a world market index. The index implies an equity risk premium of 6 percent, and Conyers has a beta of 1.3 with respect to the index. When the residuals from the beta regression are collected and included in the regression model as an additional factor, a segmented market risk premium of 14 percent is calculated and the segmented beta with respect to this factor is 0.7. The appropriate risk-free return is 5 percent. If Conyers is estimating the cost of common equity for subsidiaries in developing, segmented foreign markets, what is the appropriate cost of common equity?
A) 12.8%
B) 15.5%
C) 17.8%
D) 20.1%
E) 22.6%

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The Answer of An analyst has collected data about Conyers Inc. and a world market index. The index implies an equity risk premium of 6 percent, and Conyers has a beta of 1.3 with respect to the index. When the residuals from the beta regression are collected and included in the regression model as an additional factor, a segmented market risk premium of 14 percent is calculated and the segmented beta with respect to this factor is 0.7. The appropriate risk-free return is 5 percent. If Conyers is estimating the cost of common equity for subsidiaries in developing, segmented foreign markets, what is the appropriate cost of common equity?
A) 12.8%
B) 15.5%
C) 17.8%
D) 20.1%
E) 22.6%

An Analyst Has Collected Data About Conyers Inc