2. O'Brien Inc. has the following data: IRE = 5.00%; RPM = 6.00%; and b = 1.25. What is the firm's costof equity from retained earnings based on the CAPM?a. 13.75%b. 11.88%c. 12.25%d. 9.63%e. 12.50%

Step 1: Find the formula for cost of equity When calculating cost of equity based on CAPM, we use…

Answered: 2. O'Brien Inc. has the following data:…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 6P

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2. O'Brien Inc. has the following data: IRE = 5.00%; RPM = 6.00%; and b = 1.25. What is the firm's cost of equity from retained earnings based on the CAPM? a. 13.75% b. 11.88% c. 12.25% d. 9.63% e. 12.50%