Respuesta :
Answer:
10.412%
Explanation:
The computation of the average cost of equity of the firm is shown below;
The Cost of equity as per CAPM is
= risk free rate + beta × (market rate - risk free rate)
= 4.2 + 1.34 × (12.8 - 4.2)
= 15.724%
Now the Cost of equity as per growth model is
= (D1 ÷ Current price) +Growth rate
= [0.45 ÷ 15] + 0.021
= 5.1%
Now the Average Cost of equity is
= (15.724 + 5.1) ÷ 2 2
= 10.412%
The firm's average cost of equity is 10.412%.
The first thing to do will be to calculate the cost of equity as per CAPM which will be:
= risk free rate + beta × (market rate - risk free rate)
= 4.2 + 1.34 × (12.8 - 4.2)
= 15.724%
Then, we'll calculate the cost of equity as per growth model which will be:
= (D1 / Current price) + Growth rate
= [0.45 / 15] + 0.021
= 5.1%
Therefore, the average cost of equity will be:
= (15.724 + 5.1) / 2
= 10.412%
Therefore, the firm's average cost of equity is 10.412%.
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