Homework Answers
Part A:
Cost of Equity = Rf + Beta [ Risk Premium ]
= 3.05% + 1.8 [ 5.71% ]
= 3.05% + 10.28%
= 13.33%
Part B:
Cost of Equity = [ D1 / P0 ] +g
= [$1.30 / $10 ] + 0.05
= 0.13+0.05
= 0.18 i.e 18%
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