Question

B24&Co stock has a beta of 1.62, the current risk-free rate is 3.12 percent, and the expected return on the market is 10.62 percent. What is B24&Co's cost of equity?

Answer 1

Answer:

cost of equity = 23.05 %

Explanation:

given data

beta = 1.62

risk free rate = 3.12 percent

expected market return = 10.62 %

to find out

B24&Co's cost of equity

solution

we get here cost of equity that is express as

cost of equity = risk free rate + beta rate × ( expected market return - risk free rate )    .................1

put here value we get

cost of equity = 3.12% + 1.62 × ( 10.62% - 3.12% )

cost of equity =  3.12% + 1.62 × 7.50%

cost of equity = 3.12% + 19.93 %

cost of equity = 23.05 %