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Trahan Lumber Company hired you to help estimate its cost of capital. You obtained the following data: Beta of the company is 1.5; current risk-free
Trahan Lumber Company hired you to help estimate its cost of capital. You obtained the following data: Beta of the company is 1.5; current risk-free rate is 3% and the market rate is 10.2467%. If the company uses its retained earnings, what will be the cost of capital for the company based on CAPM? (Note that although the company doesn't have to pay anyone when it uses its retained earnings, there is still an implicit cost equal to the amount stockholders typically require based on the beta of the company.))
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