Question

Jesse Corp.'s stock has a Beta of 1.19. The risk-free rate is 5%, and the expected market return is 11%. The firm's cost of common equity, Re, is _____%

Answer 1

Risk-free Rate = 5%
Beta = 1.19
Market Return = 11%

Cost of Common Equity = Risk-free Rate + Beta * (Market Return - Risk-free Rate)
Cost of Common Equity = 5% + 1.19 * (11% - 5%)
Cost of Common Equity = 12.14%

So, cost of common equity of firm is 12.14%