Last week the price of Costco's (Ticker: COST) common stock closed at $302.50 per share. Use the data below to compute Costco's beta, then use the beta to estimate its required cost of equity. The prices have been adjusted for dividends and stock splits. Assume the appropriate risk-free rate is 3.50% and the market risk premium is 5.5%. Show your beta to 4 decimal places. Notice the ordering of the dates when estimating the beta.
Costco's Beta = ________ Costco's Cost of Equity Capital = _______ %
Friday Closing Prices for Costco (COST) and the S&P 500 Index
Week of |
Costco Friday Close |
SP500 Friday Close |
5/13/19 |
247.75 |
2859.53 |
5/20/19 |
246.75 |
2826.06 |
5/27/19 |
239 |
2752.06 |
6/3/19 |
255.5 |
2873.34 |
6/10/19 |
259.5 |
2886.98 |
6/17/19 |
265.5 |
2950.46 |
6/24/19 |
263.75 |
2941.76 |
7/1/19 |
267.75 |
2990.41 |
7/8/19 |
278.75 |
3013.77 |
7/15/19 |
281 |
2976.61 |
7/22/19 |
280.75 |
3025.86 |
7/29/19 |
272.5 |
2932.05 |
8/5/19 |
273 |
2918.65 |
8/12/19 |
273.5 |
2888.68 |
8/19/19 |
273.5 |
2847.11 |
8/26/19 |
294 |
2926.46 |
9/2/19 |
303.75 |
2978.71 |
9/9/19 |
292 |
3007.39 |
9/16/19 |
286.25 |
2992.07 |
9/23/19 |
286 |
2961.79 |
9/30/19 |
291.75 |
2952.01 |
10/7/19 |
297.5 |
2970.27 |
10/14/19 |
302.5 |
2997.95 |
Beta is given by the formula
Cost of Equity is given by
where
Last week the price of Costco's (Ticker: COST) common stock closed at $302.50 per share. Use...
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