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    Cost of Reinvested Capital

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    9-11
    Cost of reinvested profits and new common shares - CAPM
    Using the data for each firm shown in the following table, calculate the cost of reinvested profits and new common shares using the CAPM.

    P0 Rf Market Total of
    Firm Beta Current Risk-free Risk discount &
    Market Price rate Premium floatation costs
    1 0.84 $15.40 3.20% 4.80% $1.12
    2 1.46 $9.65 4.10% 6.10% $0.78
    3 1.12 $32.10 6.60% 5.60% $2.94
    4 0.61 $25.00 2.80% 5.80% $2.41

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    https://brainmass.com/business/the-time-value-of-money/cost-reinvested-capital-590784

    Solution Preview

    P0 Rf Market Km Total of No
    Firm Beta Current Risk-free Risk Market discount &
    Market Price rate Premium Return floatation costs No
    1 0.84 ...

    Solution Summary

    The solution shows the computation for cost of reinvested capital using CAPM approach.

    $2.19