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    The Cost of Equity Capital and the CAPM

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    Please use the following (hypothetical) information to calculate the "cost of equity" by using the CAPM model:

    RE = RF + Beta(RM - RF)

    Nike = 20% + 0.80(7.50% - 20%) =

    Sony = 20% + 1.40(8.50% - 20%) =

    McDonald's = 20% + 0.30(9.50% - 20%) =

    © BrainMass Inc. brainmass.com May 20, 2020, 10:24 pm ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/512140

    Solution Preview

    RE = RF + Beta(RM - RF)

    Nike = 20% + 0.80(7.50% - 20%)
    = 20% + 0.80(-0.125)
    = ...

    Solution Summary

    This solution contains a step by step calculation for the cost of equity using the CAPM model.

    $2.19

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