CFIN
CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 11, Problem 5PROB
Summary Introduction

CAPM:

CAPM full form is Capital asset pricing model. This is the method used to find required rate of return, for given level of risk.

Calculate the cost of retained earnings are as follows:

Cost of retained earnings=Riskfree rate+(Beta×(Market rateRiskfree rate))

Given risk free rate is 3.5%and expected market rate is 9% and beta is 1.4.

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