Question
You need to compute the cost of equity of Coca Cola Amatil (CCL). You are provided with the arithmetic risk premium of 7.2%, the implied
You need to compute the cost of equity of Coca Cola Amatil (CCL). You are provided with the arithmetic risk premium of 7.2%, the implied risk premium of 7.5%, the geometric risk premium of 6.0%, and the survey risk premium is 5.8%. If you decide to use a historical risk-free rate of 3.6% and believe that the market reverses to its historical means, which of the following risk premiums would you use in the CAPM to compute CCL's cost of equity? Select one: A. The implied risk premium of 7.5% B. The survey risk premium of 5.8% C. The arithmetic risk premium of 7.2% D. The geometric risk premium of 6.0%
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