Problem 9 According to the CAPM, the cost of equity of a firm is given by: A) RF + Bu(Rm Rf), where Bu is the unlevered beta B) Rp + B2 (RM Rp), where Bu is the levered beta C) By the weighted average cost of capital (WACC) D) By the yield of the bonds of the firm E) By the equity risk premium, Rm Rf Problem 10 A firm has market value of equity of $10M and market value of debt of $10M. Yield to maturity of its debt is 10%, while the expected return of its stock is 20%. Assume that the tax rate is 0%. The WACC is given by: A) 8% B) 12% C) 15% D) 18% E) 21%