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The Abacus Computer Company has decided to use the Capital Asset Pricing Model to estimate...

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Accounting

The Abacus Computer Company has decided to use the Capital Asset Pricing Model to estimate its cost of equity. The firm's beta was estimated at 1.4. The S&P/TSX Composite Index has returned 12.5% to investors over a fairly long period of time, and Abacus has decided to use this value as the market return. Treasury bills are currently providing investors with a 6.5% yield. Abacus's cost of equity (kj) using the CAPM is:

Select one:

a. 18.5%

b. 12.5%

c. 14.9%

d. 24.0%

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