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What is the cost of equity for the project

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Question - You are asked to use the CAPM to calculate the cost of equity for a company for use in project valuation. Assume that the project is roughly the same risk and duration as the company's existing projects, building construction projects making revenues from long-term lease contracts over several decades.

The annualized yield on 30-day treasury bills: 0.5%

The annualized yield on 30-year treasury bonds: 3.6%

The average market return from 1927-today: 11.6%

The forward looking market risk premium: 4%

Sample covariance of company stock with S&P500: 0.3

Sample variance of S&P500: 0.5

Required - What is the cost of equity for the project according to the CAPM?

Reference no: EM133010592

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