Question

The common stock of Serenity Homescapes has a beta of 1.21 and a standard deviation of 17.8 percent. The market rate of return is 13.5 percent and the risk-free rate is 3.2 percent. What is the cost of equity for this firm? Multiple Choice 15.66 percent 13.61 percent 13.93 percent 16.25 percent 14.90 percent

Answer 1

Ans 15.66 percent

Cost of Equity =	Risk free Return + (Market Return - Risk free return)* Beta
Cost of Equity =	3.2% + (13.5% - 3.2%) * 1.21
Cost of Equity =	15.66%