The Rhaegel Corporation's common stock has a beta of 1.2.f the risk-free rate is 5percent and the expected return on the market is 14 percent, what is the company's costof equity capital?Multiple Choice15.8%16.59%15.01%16.43%21.8%

Cost of equity can be defined as the expected return demanded by the shareholders of a company. In…

The Rhaegel Corporation's common stock has a beta of 1.2.f the risk-free rate is 5 percent and the expected retum on the market is 14 percent, what is the company's cost of equity capital? Multiple Choice 15.8% 16.59% 15.01% 16.43% 21.8%

The Rhaegel Corporation's common stock has a beta of 1.2.f the risk-free rate is 5 percent and the expected retum on the market is 14 percent, what is the company's cost of equity capital? Multiple Choice 15.8% 16.59% 15.01% 16.43% 21.8%

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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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

The Rhaegel Corporation's common stock has a beta of 1.2.f the risk-free rate is 5
percent and the expected return on the market is 14 percent, what is the company's cost
of equity capital?
Multiple Choice
15.8%
16.59%
15.01%
16.43%
21.8%

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