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6. Using the numbers below, work out the cost of equity financing for a Mexican firm under two alternate assumptions: In both cases, assume the
6. Using the numbers below, work out the cost of equity financing for a Mexican firm under two alternate assumptions:
In both cases, assume the risk less rate is 2%.
Mexican Index: Expected Return 8%, Beta: 1.0
World Index:Expected Return 7%, Beta 0.7.
a) the Mexican stock market is fully segmented from world stock markets;
b) the Mexican stock market is fully integrated with stock markets.
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