Find the cost of common equity using the CAPM method. (Instructor Hint: Hello! the CAPM model! Sounds familiar? This is something we have learned from chapter 8. Chapter 10 also provides a detailed illustration of using CAPM. Here is the formula:

rs = rRF + (rM rRF)b

Please be aware that the question has already provided you with the market risk premium. Read the question: "The current risk free rate is .5% and the market risk premium is 4%.". So (Rm-Rrf ) is 4%. You don't need to deduct the risk free rate from this 4%.

	A.	7.58%
	B.	12.08%
	C.	0.54%
	D.	4.04%