Answered: Corps has a beta of 1.4. If the rate on…

Corps has a beta of 1.4. If the rate on U.S. Treasury bills is 4.5% and the expected rate of return on the stock market is 12%, what is Corps cost of common equity financing?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 10QTD

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Question

Cost of equity

Corps has a beta of 1.4. If the rate on U.S.
Treasury bills is 4.5% and the expected rate of
return on the stock market is 12%, what is
Corps cost of common equity financing?

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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