PQR HAS BEEN INFORMED TO IMPLEMENT A NEW PROJECT AND WISHES TO MAKE AN INVESTMENT APPRAISEL,IT IS A NEW COMPANY AND IT IS NOT ABLE TO ASSESS COST OF EQUITY.IT HAS DETERMINED 2 COMPANIES XYZ AND ABC WHICH ARE MANUFACTURING SAME PRODUCTS.

XYZ HAS A BETA OF 0.56 AND DEBT/EQUITY OF 0.55 AND ABC HAS BETA OF 0.66 AND DEBT /EQUITY OF 0.50.

DEBT TO EQUITY OF PQR IS 0.98

RISK FREE RATE IS 4.9% AND MARKET RISK PREMIUM IS 8%, TAX RATE IS 30 %