Company cost of retained earnings using the capm approach

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Jones inc wants you to estimate the company's wacc. but before you do so, you need to estimate the cost of debt and equity. YOu have obtained the following information. (1 Jones bonds mature in 20 years have a 6.00% annual coupon, a par value of 1000 and a market price of 1,225. (2) the tax rate is 35% (3) the risk free rate is 3.50 the market risk premuim is 5.50% and the stoks beta is 1.10 (4) The targer capital structure consists of 35% debt and the balance is common equity. The firm uses CAPM to estimate the cost of equity, and does not expect to issue any common stock. Calculate the company's cost of retained earnings using the CAPM approach.

Reference no: EM132061181

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