Look again at Table 9.1 . This time we will concentrate on Ambuja Cements.

a. Calculate Ambuja Cements 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 7% and a market risk premium of 10%.

b. Can you be confident that Ambuja Cements true beta is not the industry average?

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

Standard Error 0.10 0.13 0.17 0.14 0.12 0.11 0.09 Beta 0.71 Ambuja Cements Limited0.84 ACC Limited India Cements Limited 1.50 Madras Cements Limited0.82 ros JUM Shree Cement Limited 0.83 Ultratech Cement Limited 0.45 Industry Portfolio 0.86