Suppose that TechInc consists of a perpetual cash flow of $$15$M USD that will arrive next year. Assume the risk free rate is $2$ percent.

Apply the local CAPM to calculate the discount rate for TechInc.

Corr$($Ri$,$Rj$)$

TechInc

Local

World

SD $(\%)$

E$($R$)(\%)$

TechInc

$1\mathrm{.}00$

$0\mathrm{.}75$

$0\mathrm{.}70$

$16$

$?$

Local Market

$1\mathrm{.}00$

$0\mathrm{.}85$

$13$

$10$

World

$1\mathrm{.}00$

$12$

$8$

Question $16$ options:

$10$ percent

$9$ percent

$8$ percent