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11-1 Suppose the current risk-free rate of return is 5 percent and the expected market risk premium is 7 percent. Using this information, what is the cost of retained earnings for a company with a beta coefficient equal to 2.0? 11-2 Canyon Eatery’s common stock, which is currently selling for $50 per share, has a beta coefficient equal to 0.75. Canyon has paid a dividend equal to $6 per share since it has been in business, and expectations are that the same dividend will be paid forever. Canyon’s investment banker charges 7 percent when new common stock is issued. What is Canyon’s (a) cost of retained earnings and (b) cost of new common equity?

          11-1 Suppose the current risk-free rate of return is 5 percent and the expected market risk premium is 7 percent. Using this information, what is the cost of retained earnings for a company with a beta coefficient equal to 2.0?
11-2 Canyon Eatery’s common stock, which is currently selling for $50 per share, has a beta coefficient equal to 0.75. Canyon has paid a dividend equal to $6 per share since it has been in business, and expectations are that the same dividend will be paid forever. Canyon’s investment banker charges 7 percent when new common stock is issued. What is Canyon’s (a) cost of retained earnings and (b) cost of new common equity?

Added by Ines R.

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