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Vega Systems Ltd. has a beta of 1.2. The yield on a 3-month T-bill is 5.2%, and the yield on a 10-year T-bond is 6.8%. The market risk premium is 5.9%, and the return on an average stock in the market last year was 17.5%. What is the estimated cost of common equity using the CAPM model? a. 11.28% b. 12.48% c. 13.38% d. None of the above

Vega Systems Ltd. has a beta of 1.2. The yield on a 3-month T-bill is 5.2%, and the yield on a 10-year T-bond is 6.8%. The market risk premium is 5.9%, and the return on an average stock in the market last year was 17.5%. What is the estimated cost of common equity using the CAPM model? a. 11.28% b. 12.48% c. 13.38% d. None of the above

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vega Systems Ltd. has a beta of 1.2. The yield on a 3-month T-bill is 5.2%, and the yield on a 10-year T-bond is 6.8%. The market risk premium is 5.9%, and the return on an average stock in the market last year was 17.5%. What is the estimated cost of common equity using the CAPM model? a. 11.28% b. 12.48% c. 13.38% d. None of the above
Transcribed Image Text:Vega Systems Ltd. has a beta of 1.2. The yield on a 3-month T-bill is 5.2%, and the yield on a 10-year T-bond is 6.8%. The market risk premium is 5.9%, and the return on an average stock in the market last year was 17.5%. What is the estimated cost of common equity using the CAPM model? a. 11.28% b. 12.48% c. 13.38% d. None of the above
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