Suppose that a foreign project has a beta of 0.85,the risk-free return is 12%,and the required return on the market is estimated at 19%.Then the cost of capital for the project is

Question

Quizplus · Accepted Answer

The cost of capital for the project can be calculated using the following formula: 
Cost of Capital = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)
Substituting the values given:
Cost of Capital = 12% + 0.85 * (19% - 12%)
Cost of Capital = 12% + 0.85 * 7%
Cost of Capital = 17.95%
Therefore, the cost of capital for the project is 17.95%, which is closest to choice B - 17.95%.

Suppose That a Foreign Project Has a Beta of 0