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Finding cost of common equity using CAPM formula.

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1. Assume that you are a consultant to Magee Inc., and you have been provided with the following data: rRF = 4.00%; RPM = 5.00%; and b = 1.15. What is the cost of equity from retained earnings based on the CAPM approach?

2. Lanser Inc. hired you as a consultant to help them estimate its cost of capital. You have been provided with the following data: D1 = $0.80; PO = $22.50; and g = 5.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings?

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