Allegheny Valley Power Company Common Stock Has a Beta of 0.80

question 183

Multiple Choice

Allegheny Valley Power Company common stock has a beta of 0.80. If the current risk-free rate is 6.5% and the expected return on the stock market as a whole is 16%, determine the cost of retained earnings for the firm (using the CAPM) .

• A)14.1%
• B)7.6%
• C)6.5%
• D)None of the above

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