A corporation has 1 million shares of common stock outstanding. The beta of the common stock...

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A corporation has 1 million shares of common stock outstanding. The beta of the common stock is estimated to be 1.75. The rat

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Answer 1

Answer #1

Cost of equity=risk free rate+beta*(market rate-risk free rate)

=4+1.75*(12-4)

which is equal to

=18%

NOTE:Tax rate would not affect the cost of equity.

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Answer 2

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