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TABLE 9 Calculate Norfolk Southern’s cost of equity from the CAPM using its own beta estimate and the industry beta estimate How different are your answers Assume a risk-free rate of 2% and

TABLE 9.1

a. Calculate Norfolk Southern’s cost of equity from the CAPM using its own beta estimate and the industry beta estimate. How different are your answers? Assume a risk-free rate of 2% and a market risk premium of 7%.

b. Can you be confident that Norfolk Southern’s true beta is not the industry average?

c. Under what circumstances might you advise Norfolk Southern to calculate its cost of equity based on its own beta estimate?

Look again at Table 9 1 This time we will concentrate

Apr 26 2020 View more View Less

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