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    Required Rate of Return for CAPM.

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    Kingsmen, Inc. is an all equity financed firm. The beta is .75, the market risk premium is 8% and the risk free rate is 4%. The cost of debt at companies of similar risk is 7%. What is the required return on the stock of Kingsmen?

    © BrainMass Inc. brainmass.com September 27, 2022, 9:58 am ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/required-rate-return-capm-478068

    SOLUTION This solution is FREE courtesy of BrainMass!

    Using CAPM,

    Required Return on Equity = Risk free rate + Beta*Market Risk Premium

    Now input the given values in above formula

    Required Return = 4% + 0.75*8%
    = 4% + 6%
    = 10%

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com September 27, 2022, 9:58 am ad1c9bdddf>
    https://brainmass.com/business/beta-and-required-return-of-a-project/required-rate-return-capm-478068

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