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kc = krf + b(km-krf) Krf = Risk Free rate b = Beta km krf = Market Risk Premium or Expected rate of return for

kc = krf + b(km-krf)

Krf = Risk Free rate

b = Beta km

krf = Market Risk Premium or Expected rate of return for "average security"

minus the risk free rate, km - krf

Example: If beta is 1.4, risk-free rate is 3.75% and expected market rate is 12%

What is the common stockholder required rate of return?

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