The up and coming corporation's common stock has a beta of 1.05. if the risk-free rate is 5.3 percent and the expected return on the market is 12 percent, up and coming's cost of equity is percent. (do not include the percent sign (%). round your answer to 2 decimal places. (e. g., 32.16))

Question

Evangeline Henson

Business

13 August, 08:12

The up and coming corporation's common stock has a beta of 1.05. if the risk-free rate is 5.3 percent and the expected return on the market is 12 percent, up and coming's cost of equity is percent. (do not include the percent sign (%). round your answer to 2 decimal places. (e. g., 32.16))

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Kelvin Meadows · Answer 1

Cost of equity is calculated as -

Cost of equity = Risk free return + Beta * (Market risk - Risk free return)

Given,

Risk free return = 5.3 %

Market risk = 12 %

Beta = 1.05

Cost of equity = 5.3 % + (1.05 * (12-5.3%))

Cost of equity = 12.335 % or 12.24 %