Based on the table below, suppose that Telmex has made its shares tradable internationally via cross-listing on NYSE. Using the CAPM paradigm (p.424), estimate Telmex's equity cost of capital. Discuss the possible effects of international pricing of Telmex shares on the share prices and the firm's investment decisions. In 200- 300 words explain your answer and your rationale.
Correlation Coefficients
Telmex Mexico World SD (%) R (%)
Telmex 1.00 .90 0.60 18 ?
Mexico 1.00 0.75 15 14
World 1.00 10 12
The above table provides the correlations among Telmex, a telephone/communication company located in Mexico, the Mexico stock market index, and the world stock market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is 5%