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Burnham Brothers Inc. uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt.
Burnham Brothers Inc. uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would REDUCE its cost of equity, assuming the other factors stay constant?
Expected inflation increases.
The market return increases.
The market risk premium declines.
The risk free rate remains the same.
The company's beta increases.
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