Scanlon Inc

question 68

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 = 1.70.Based on the CAPM approach,what is the cost of equity from retained earnings?

• A) 15.24%
• B) 12.63%
• C) 10.03%
• D) 13.94%
• E) 13.03%

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Definitions:

Quenching

A heat treatment process used to harden or soften metal by heating it and then rapidly cooling it.

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product more efficiently.

Dispatch

The sending off of a message, parcel, or shipment with speed and efficiency.

Diminishing Marginal Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, starts to decrease.