Suppose that a foreign project has a beta of 1.94, the risk-free return is 13.22% and...

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Question

Suppose that a foreign project has a beta of 1.94, the risk-free return is 13.22% and the required return on the market is es

Answer 1

Answer #1

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Statementshowing Computations

Calculation of cost of capital:
Paticulars	Amount
Beta, B	1.94
Return on Market, Rm	23.87%
Risk Free Rate, Rf	13.22%
Ke = Rf+ B(Rm-Rf)
Ke = 13.22% + 1.94(23.87%-13.22%)
Ke = 13.22% + 1.94(10.65%)
Ke = 13.22% + 20.66%
Ke = 33.88%
Cost of capital is 33.88%

Answer 2

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