Southern home cookin' just paid its annual dividend of $0.65 a share. the stock has a market price of $13 and a beta of 1.12. the return on the u. s. treasury bill is 2.5 percent and the market risk premium is 6.8 percent. what is the cost of equity?

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Business

Mueller

21 March, 23:56

Southern home cookin' just paid its annual dividend of $0.65 a share. the stock has a market price of $13 and a beta of 1.12. the return on the u. s. treasury bill is 2.5 percent and the market risk premium is 6.8 percent. what is the cost of equity?

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Braelyn Crosby · Answer 1

Cost of Equity as per CAPM = rf + beta * (rm-rf)

rf = risk free rate = 2.5%

beta = 1.12

rm-rf = market risk premium = 6.8%

Cost of equity = 2.5 + 1.12*6.8 = 10.116% = 10.12%