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QUESTION
The risk free rate of return is 3% and the market risk premium is 12%. Penn Trucking has a beta of 1.8 and a standard deviation of returns of 24%....
The risk free rate of return is 3% and the market risk premium is 12%. Penn Trucking has a beta of 1.8 and a standard deviation of returns of 24%. Penn Trucking's marginal tax rate is 40%. Analysts expect Penn Trucking's dividends to grow by 5% per year for the foreseeable future. Using the capital asset pricing model, what is Penn Trucking's cost of retained earnings?
