Solved: Using the capital asset pricing model on page 293 in the, Basic Statistics

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Using the capital asset pricing model on page 293 in the

1. Foe Corporation has a beta of 1.4, the expected return on a market portfolio is 8.7% and the risk free rate is expected to be 3.7% (so the market risk premium is expected to be 5%). Using the Capital Asset Pricing Model (on page 293 in the textbook), what is Foe's after tax cost of equity?

2. Why is it not necessary to adjust for taxes in question 7 (like we did in question 6)?

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Basic Statistics: Using the capital asset pricing model on page 293 in the

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