What is the company cost of capital of charcoal corporation

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Problem 1: The market value of Charcoal Corporation's common stock is $20 million, and the market value of its risk-free debt is $5 million. The beta of the company's common stock is 1.25, and the market risk premium is 8 percent. If the Treasury bill rate is 5 percent, what is the company's cost of capital? (Assume no taxes.)

Option 1: 15.0 percent
Option 2: 14.6 percent
Option 3: 13.0 percent
Option 4: 7.0 percent

Problem 2: Company A's historical returns for the past three years were 6 percent, 15 percent, and 15 percent. Similarly, the market portfolio's returns were 10 percent, 10 percent, and 16 percent. Calculate the beta for Stock A.

Option 1: 1.75
Option 2: 1.00
Option 3: 0.57
Option 4: 0.75

Reference no: EM132907944

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