#2 Homework #6F (Cost of equity financing)
The Yo-Yo Corporation tries to determine the appropriate cost for retained earnings to be used in capital budgeting analysis. The firms beta is 0.81. The rate on six-month T-bills is 2.11%, and the return on the S&P 500 index is 5.77%. What is the appropriate cost for retained earnings in determining the firms cost of capital?