Cost of common stock

equitylong dashCAPM

J&M Corporation common stock has a beta,

b,

of

1.7

The risk-free rate is

8%,

and the market return is

14%.

a.Determine the risk premium on J&M common stock.

b.Determine the required return that J&M common stock should provide.

c.Determine J&M's cost of common stock equity using the

CAPM.