The risk free rate of return is 3% and the market risk premium is 12%. Penn Trucking has a beta of 1.8 an a standard deviation of returns of 24 %. Penn Trucking's marginal tax rate is 40%. Analyst expect Penn Trucking's dividends to grow by 5% per year for the foreseeable future. Using the capital asset pricing model, what is Penn Trucking's cost of retained earnings?© BrainMass Inc. brainmass.com March 21, 2019, 7:52 pm ad1c9bdddf
The solution explains how to calculate the cost of retained earnings using CAPM.