CAPM: Capital asset pricing model . This is the method used to find required rate of return , for given level of risk. Calculate the cost of equity are as follows: Cost of equity = Riskfree rate + ( Beta × ( Market rate − Riskfree rate ) ) Cost of new common stock is the cost incurred by the company for issue new common stock. Calculate the cost of equity as follows: Cost of equity = Expected dividend Current price + Growth rate HE has current price is $37.5 and Current dividend of $2. Risk free rate is 4% and beta is 1.1 and market return is 10%.

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Chapter 8, Problem 20PROB

Summary Introduction

CAPM: Capital asset pricing model. This is the method used to find required rate of return, for given level of risk.

Calculate the cost of equity are as follows:

Cost of equity=Riskfree rate+(Beta×(Market rate−Riskfree rate))

Cost of new common stock is the cost incurred by the company for issue new common stock.

Calculate the cost of equity as follows:

Cost of equity=Expected dividendCurrent price+Growth rate

HE has current price is $37.5 and Current dividend of $2. Risk free rate is 4% and beta is 1.1 and market return is 10%.

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