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    Question

    Which of the following is not a component of cost of

    equity in CAPM?
    A Risk-free rate Correct Answer Incorrect Answer
    B Market risk premium Correct Answer Incorrect Answer
    C Beta of the firm Correct Answer Incorrect Answer
    D Cost of debt Correct Answer Incorrect Answer
    E All are components except cost of debt Correct Answer Incorrect Answer

    Solution

    CAPM: Cost of equity = Risk-free rate + Beta × Market premium. Cost of debt is separate.

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