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Based on the information below, what is the cost of equity of Firm X (a company in Brazil), using the CAPM model with country risk
Based on the information below, what is the cost of equity of Firm X (a company in Brazil), using the CAPM model with country risk premium? (Please show all work).
Yield on U.S. 10-year Treasury bond | 5.5 |
Yield on Brazil 10-year Treasury bond | 10.5 |
Annualized standard deviation of Brazil stock index | 35 |
Annualized standard deviation of Brazilian real-denominated government bond | 20 |
Risk-free rate in Brazil | 3 |
Expected market return in Brazil | 6 |
Equity beta of Firm X | 1.5 |
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