P9-9: Cost of common stock: CAPM J&M Corporation has a beta,b,of 1.2. The risk-Free Rate is...

Question

Question

P9-9: Cost of common stock: CAPM J&M Corporation has a beta,b,of 1.2. The risk-Free Rate is 6%, and the market return is 11%.

A. Determine the risk premium on J&M common stock.

B. Determine the required return that J&M common stock should provide.

C. Determine J&M's cost of common stock equity using CAPM.

Answer 1

Answer #1

Risk premium market return - risk free rate- 5.00% [ 1196-696] 12.00% 0.06+(1.2*0.05) Required return- risk free rate + marke

Answer 2

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