Given the information below, what is an estimate of this company's cost of common equity? 7-year...
Given the information below, what is an estimate of this company's cost of common equity?
- 7-year Treasury note = 3.2%
- current stock price = $95.95
- average annual return on S&P 500 over past five years = 12.2%
- 9-month Treasury bill rate = 1.8%
- current stock beta = 1.93
- tax rate = 27.0%
Homework Answers
| Answer: 20.57% |
Explanation and calculation:
| Cost of equity per CAPM = Risk free rate+Beta*(Market return-Risk free rate) = 3.2%+1.93*(12.2%-3.2%) = | 20.57% |
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