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 1.98. The rate on six-month T-bills is 2.92%, and the return on the S&P 500 index is 7.26%. What is the appropriate cost for retained earnings in determining the firm’s cost of capital?
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 1.98. The rate on six-month T-bills is 2.92%, and the return on the S&P 500 index is 7.26%. What is the appropriate cost for retained earnings in determining the firm’s cost of capital?