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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) 18.0%
B) 11.5%
C) 10.0%
D) none of the above

Respuesta :

Parrain

Answer: A) 18.0%

Explanation:

Can be calculated by Capital Asset Pricing Model;

Cost of retained earnings/ Required return = Risk free rate + beta * (Market premium)

= 5% + 1.3 * 10%

= 18%