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A firm has 10,000 shares outstanding, and the price of the stock is $50/share. If the...

A firm has 10,000 shares outstanding, and the price of the stock is $50/share. If the beta is 1.4 and risk-free rate is 4%, what would be the cost of equity if expected market return is 10% and tax is 30%?

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Answer #1

Cost of equity is calculated using the CAPM:-

=Rf rate+beta*(market return-rf rate)

=4%+1.4*(10%-4%)

=12.40%

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