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# Beta and Cost of Equity Capital

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Calculate the beta and the cost of equity capital. The following historical data for a proxy firm is similar to the firm evaluated in the final project assignment.

Year Market Rate of Return Firm Rate of Return
20X0 25% 15%
20X1 10% 6%
20X2 15% 9%
20X3 20% 12%

Using the above data calculate the beta of the firm.
If the risk-free rate is 4%, and the market rate of return is 14%, calculate the required rate of return (cost of equity) for the stock using CAPM.

#### Solution Preview

calculate the beta and the cost of equity capital. The following historical data for a proxy firm is similar to the firm evaluated in the final project assignment.

Year     Market Rate of Return       Firm Rate of Return
20X0            25%                          15%
20X1            10%                           6%
20X2            15%                           9%
20X3            20%                          12%

Using the above data calculate the beta of the firm.
If the risk-free ...

#### Solution Summary

Calculates Beta and Cost of Equity Capital.

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