JACKS has a beat of 1. The risk-free rate is 0.9% and the expected return on the S&P500 is 8%.
1 - What is JACKS cost of equity?
2- Now assume that the expected market risk premium is 8%. What is JACKS cost of equity?
a.Cost of equity=risk free rate+beta*(market rate-risk free rate)
=0.9+1*(8-0.9)
=8%
b.Cost of equity=risk free rate+Beta*market risk premium
=0.9+(8*1)
=8.9%
JACKS has a beat of 1. The risk-free rate is 0.9% and the expected return on...
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