What is the retained earnings in determining the firm's cost of capital?

Business & Finance
Tutor: None Selected Time limit: 1 Day

The Yo-Yo Corporation tries to determine the appropriate cost for retained earnings to be used in capital budgeting analysis. The firm’s beta is 1.64. The rate on six-month T-bills is 2.67%, and the return on the S&P 500 index is 6.83%. What is the appropriate cost for retained earnings in determining the firm’s cost of capital?

Round the answers to two decimal places in percentage form.

Sep 28th, 2015

Thank you for the opportunity to help you with your question!

cost of retained Earnings using CAPM model: Rf +beta*(Rm-Rf)

= 2.67% +1.64*(6.83% - 2.67%)= 9.49%

Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 28th, 2015

Are you studying on the go? Check out our FREE app and post questions on the fly!
Download on the
App Store
...
Sep 28th, 2015
...
Sep 28th, 2015
Dec 9th, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer