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The beta of stock A is 0.70. The risk-free rate is 5 percent, and the market risk premium is 8.5 percent. Assume the capital-asset-pricing model holds. What is the expected return on stock A? E(RA) – 5 +0.7(8.5)=10.95%. Suppose Garageband.com has a 28 percent cost of equity capital and a 10% before tax cost of debt capital. ................
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