The risk free rate is (8% − 2%) = 6%. We are told that the market risk premium is 11%, and we calculated the cost of equity (required return) to be (10 million / 55.6 million =) 18%. Since we know the risk-free rate, the market risk premium, and the discount rate, we can use the capital asset pricing model to solve for beta:
Required rate of return = 0.18 = 0.06 + (b × 0.11)
0.18 – 0.06 = b × 0.11
0.12 = b × 0.11
b = 1.09
