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The Lenzie Corporation’s common stock has a beta of 1.30. If the risk-free rate is 4.4%...

The Lenzie Corporation’s common stock has a beta of 1.30. If the risk-free rate is 4.4% and the expected return on the market is 10%, what is the company’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.)

Cost of equity capital ___ %

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Answer #1

Expected return = risk free rate + beta * market risk premium

=>

cost of capital

= 4.4% + 1.3 * (10% - 4.4%)

= 11.68%

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