Ask Question
11 August, 03:27

Halestorm Corporation's common stock has a beta of 1.20. Assume the risk-free rate is 4.5 percent and the expected return on the market is 12 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.) Cost of equity %

+4
Answers (1)
  1. 11 August, 03:41
    0
    Ke = Rf + β (Rm - Rf)

    Ke = 4.5 + 1.20 (12-4.5)

    Ke = 4.5 + 9

    Ke = 13.5%

    Explanation:

    Cost of equity is equal to risk-free rate plus market risk premium. Market risk premium is beta multiplied by risk premium. Risk premium is market return minus risk-free rate.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Halestorm Corporation's common stock has a beta of 1.20. Assume the risk-free rate is 4.5 percent and the expected return on the market is ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers