The cost of retained earnings equity for Tangshan Mining would be 18.00 percent if the expected return on U.S. Treasury Bills is 5.00 percent, the market return is 10.00 percent, and the firm's beta is 1.3.

Question

Quizplus · Accepted Answer

The cost of retained earnings equity is calculated using the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: 5% + 1.3 * (10% - 5%) = 11.5%, not 18.00%.

The Cost of Retained Earnings Equity for Tangshan Mining Would