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

O'Brien Inc. has the following data: r RF=5.00%; RP M=6.00%; and b=1.10. What is the firm's cost of equity from retained earnings based on the CAPM? A. 11.83% B. 13.22% C. 11.25% D. 8.93% E. 11.60%

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 33MCQ: Selected information for Berry Company is as follows: Berrys return on equity rounded to the nearest...

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Question

O'Brien Inc. has the following data: r RF=5.00%; RP M=6.00%; and b=1.10. What is the firm's cost of equity from retained earnings based on the CAPM?

A. 11.83%

B. 13.22%

C. 11.25%

D. 8.93%

E. 11.60%

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

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