Scanlon Inc

question 27

Multiple Choice

Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital.You have been provided with the following data: r_RF = 4.10%;RP_M = 5.25%;and b = 0.70.Based on the CAPM approach,what is the cost of equity from retained earnings?

• A) 9.25%
• B) 7.00%
• C) 8.47%
• D) 7.08%
• E) 7.78%

---

Definitions:

Standard Deviation

A statistical measure that quantifies the variability or spread of a dataset around its mean value.

Deviation

Difference between expected payoff and actual payoff.

Expected Value

The weighted average of all possible values of a random variable, with the weights being the probabilities of each outcome.

Absolute Value

The distance of a number from zero on the number line, disregarding its sign.