GPS Inc wishes to estimate its cost of retained earnings. The firm's beta is 1.3. The rate on 6-month
T-bills is 2%, and the return on the S&P 500 index is 15%.
What is the appropriate cost for retained
earnings in determining the firm's cost of capital?
A) 17.0% B) 19.5% C) 22.1% D) 18.9%
D
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