Risk-free rate = RF = 3.6%
Beta of Sunwest's common stock = β = 0.87
Expected return on Market = RM = 14%
Company's cost of Equity capital (Re) can be computed using the CAPM equation
Re = RF + β*(RM - RF) = 3.6% + 0.87*(14%-3.6%) = 12.648% ~ 12.65% (Rounded to two decimals)
Cost of equity = 12.65%
Answer (%) -> 12.65
The common stock of Sunwest, Inc. has a beta of.87. Assume the risk-free rate is 3.6...
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