What would be the cost of retained earnings equity for Tangshan Mining if the expected return on U.S. Treasury Bills is 5.00%, the market risk premium is 10.00 percent, and the firm's beta is 1.3?
A) 11.5%
B) 18.0%
C) 10.0%
D) none of the above.

Question

Quizplus · Accepted Answer

The cost of equity for Tangshan Mining can be calculated using the capital asset pricing model (CAPM):
Cost of equity = risk-free rate + beta * market risk premium
= 5.00% + 1.3 * 10.00%
= 18.00%
Therefore, the cost of retained earnings equity for Tangshan Mining is 18.00%, which corresponds to choice B.

What Would Be the Cost of Retained Earnings Equity for Tangshan