Develop a reasonable estimate or range of estimates for SDI's cost of equity capital (ks) using the CAPM method. Tony Biddle informed you that 20-year Treasury bonds currently yield 6.1 percent, while the yield on 90-day T-bills is 5.2 percent. You could look up current rates on these instruments in The Wall Street Journal or some similar publication, but if you do, think about whether other parameters (risk premiums, betas, and inputs to the DCF model) might have changed since other data in the case were determined.

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To estimate SDIs cost of equity capital ks using the CAPM method we need to use the following formul... View the full answer