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Part 1

Aluminum maker Alcoa has a beta of about

1.9,

whereas Hormel Foods has a beta of

0.35.

If the expected excess return of the market portfolio is

4%,

which of these firms has a higher equity cost of capital, and how much higher is it?

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Part 1

Alcoa's equity cost of capital is

enter your response here%.

(Round to two decimal places.)

Part 2

Hormel's equity cost of capital is

enter your response here%.

(Round to two decimal places.)

Part 3

Therefore,

Alcoa

Hormel

has the higher equity cost of capital by

enter your response here

percentage points.(Select from thedrop-down menus and round to two decimal places.)