a. What is the estimated beta coefficient of your company? What does this beta mean in terms of your choice to include this company in your overall portfolio?
b. Given the beta of your company, the present yield to maturity on U.S. government bonds maturing in one year (currently about 4.5% annually) and an assessment that the market risk premium (that is - the difference between the expected rate of return on the 'market portfolio' and the risk-free rate of interest) is 6.5%, use the CAPM equation in order to find out what is the present 'cost of equity' of your company? Explain what is the meaning of the 'cost of equity'.
This posting finds the value of beta for DR pepper/snapple. References are also provided to further validate the findings.