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NEW QUESTION: 1
Consider the following information:
30-day treasury rate (Risk Free rate) 5.2%
Company XYZ Bond yield 12.2%
Beta 1.2
Risk Premium 4.5%
Credit Rating BBB
Calculate Company XYZ's cost of retained earnings using the Bond-Yield-plus-Risk-Premium approach.
A. 21.9%
B. 16.7%
C. 5.2%
D. 20.4%
E. 9.7%
F. 12.2%
Answer: B
Explanation:
Explanation/Reference:
Explanation:
To estimate a firm's cost of retained earnings using the Bond-Yield-plus-Risk-Premium approach, simply take the company's bond yield and add the risk premium. In this case the cost of retained earnings
12.2% + 4.5% = 16.7%.

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D. vxdefault
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C. Option D
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