Problemthe risk free rate of return is 25 and the market, Ask an Expert

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Problem:

The risk free rate of return is 2.5% and the market risk premium is 8%. Penn Trucking has a beta of 2.2 and a standard deviation of returns of 28%. Penn Trucking's marginal tax rate is 35%. Analysts expect Penn Trucking's dividends to grow by 6% per year for the foreseeable future.

Required:

Question: Using the capital asset pricing model, what is Penn Trucking's cost of retained earnings?

Note: Explain all calculation and formulas.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91173251

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