Aluminum maker Alcoa has a beta of about 0.96, whereas Hormel Foods has a beta of 1.41. If the expected excess return of the market portfolio is 4%, which of these firms has a higher equity cost of capital, and how much higher is it? The firm that has the higher equity cost of capital is by %. (Select from the drop-down menu and round to two decimal places.)
Aluminum maker Alcoa has a beta of about 0.96, whereas Hormel Foods has a beta of 1.41. If the expected excess return of the market portfolio is 4%, which of these firms has a higher equity cost of capital, and how much higher is it? The firm that has the higher equity cost of capital is by %. (Select from the drop-down menu and round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Aluminum maker Alcoa has a beta of about 0.96, whereas Hormel Foods has
a beta of 1.41. If the expected excess return of the market portfolio is 4%,
which of these firms has a higher equity cost of capital, and how much higher
is it?
The firm that has the higher equity cost of capital is
by
%. (Select from the drop-down menu and round to two decimal places.)
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