You have been hired as a consultant by Feludi Inc.'s CFO, who wants you to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 1.30. Based on the CAPM approach, what is the cost of common from reinvested earnings?
A) 9.67%
B) 9.97%
C) 10.28%
D) 10.60%
E) 10.93%

Question

Quizplus · Accepted Answer

$\begin{array} { l r } 
r _ { R F } & 4.10 \% \
R _ { M } & 5.25 \% \
b&1.30\
r _ { 5 } = R F + \left( R P _ { M } \times b \right) &10.925\%
\end{array}$

You Have Been Hired as a Consultant by Feludi Inc