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Question
GPS Inc. wishes to estimate its cost of retained earnings. The firm's beta is 1.3. The rate on 6-month T-bills is 2%, and the return on the S&P 500 index is 15%. What is the appropriate cost for retained earnings in determining the firm's cost of capital?A) 17.0%
B) 19.5%
C) 18.9%
D) 22.1%
Answer
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