The Rhaegel Corporation’s common stock has a beta of 1.07. If the risk-free rate is 3.5 percent and the expected return...
The Rhaegel Corporation’s common stock has a beta of 1.07. If the risk-free rate is 3.5 percent and the expected return on the market is 10 percent, what is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Homework Answers
Cost of equity capital = Risk free rate + Beta * Risk premium
Risk free rate = 3.5%
Beta = 1.07
Risk premium = Expected return on market - Risk free rate
= 10% - 3.5%
= 6.5%
Cost of equity capital = Risk free rate + Beta * Risk premium
= 3.5 % + 1.07 * 6.5%
= 10.45%
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