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16 June, 11:53

The Rhaegel Corporation's common stock has a beta of 1.07. If the risk-free rate is 3.5 percent and the expected return on the market is 10 percent, what is the company's cost of equity capital?

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  1. 16 June, 15:31
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    10.46%

    Explanation:

    Using CAPM formula, we have the following

    Cost of equity = risk-free rate + Beta x (Market risk premium)

    = 3.5% + 1.07 x (10% - 3.5%)

    = 10.46%
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