Match the textbook definition on the left to the correct The most widely accepted and used method of calculating the cost of equity for a firm today is the capital asset pricing model (CAPM). CAPM defines the cost of equity to be the sum of a risk-free interest component and a firm-specific spread, over and above that risk-free component, as seen in the following formula: If the before-tax cost of debt is kd, and the corporate income tax is t, the after-tax cost of debt is: International CAPM (ICAPM) assumes that there is a global market in which the firm's equity trades, and therefore International portfolio theory typically concludes that adding international securities to a domestic portfolio will reduce the portfolio's risk. Although this idea is fundamental to much of international financial theory, it still depends on If all capital markets are fully integrated. securities of comparable expected return and risk should have the same required rate of return in each national market after adjusting for The most widely accepted and of of calculating the cost of equity today is the capital asset pricing (CAPM). CAPM defines the cost be the sum of a risk-free interesi and a firm-specific spread, over: that risk-free component. as see following formula: If the before-tax cost of debt is kd, and the corporate income tax is t the after-tax cost of debt is ? International CAPM (ICAPM) assumes that there is a giobal market in which the firm's. cequity trades, and therefore. International portfolio theory typically concludes that adding intemational securities to a domestic poctfollo wili reduce the portfolios riski. Although this idea is fundamental to much of international financial theory, it still deperids on If all capinil markets are fully integrated, securities of comparable expected return and risk should have the same required rate of return in each national marbet after