#9 Cost of equity **Question 9: Cost of Equity Using the Security Market Line (SML)**Stan is expanding his business and will sell common stock to acquire the necessary funds. Given that the current risk-free rate is 4% and the expected market return is 12%, calculate the cost of equity for Stan if the beta of the stock is:a. 0.75 b. 0.90 c. 1.05 d. 1.20 *Note: There are no graphs or diagrams associated with this question.*

Market premium = Market return - Risk-free rate Cost of equity = Risk-free rate + (Beta * Market…

9. Gost of equity: SML. Stan is expanding his business and will sell common stock for the needed funds. If the current risk-free rate is 4% and the expected market return is 12%, what is the cost of equity for Stan if the beta of the stock is a. О.75? b. 0.90? с. 1.05? d. 1.20?

9. Gost of equity: SML. Stan is expanding his business and will sell common stock for the needed funds. If the current risk-free rate is 4% and the expected market return is 12%, what is the cost of equity for Stan if the beta of the stock is a. О.75? b. 0.90? с. 1.05? d. 1.20?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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#9 Cost of equity

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

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