Assume the CAPM holds with a risk$-$free rate of $3\mathrm{.}2\%$ and an equity risk premium of $4\mathrm{.}3\%.$ A firm is worth $$100$ and has an asset beta of $0\mathrm{.}4.$ The firm has just announced plans to invest in a new project with a cost of $$10,$ an NPV of $$4$ and a beta of $1\mathrm{.}9.$ The firm will issue new equity to fund the project. What is the appropriate cost of capital to be used to calculate the project NPV$?$ Give your answer in percent to the nearest basis point.

Selected Answer:

Correct $11\mathrm{.}37$

Correct Answer:

Correct $11\mathrm{.}37$