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CAPM for a stock perceived to be more risky than average

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If a company's stock is perceived to be more risky than average, what will happen to their equity costs of capital? Explain using the capital asset pricing model.

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Solution Summary

Answer a conceptual question about Capital Asset Pricing Model are examined. The capital asset pricing model is explained.

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Re=Rf+Beta*(Rm-Rf)
Re=required rate of return on company stock
Rf=risk free rate
Rm=return on ...

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