# Cost of Common Equity

Using the CAPM method, what is the cost of common equity if Krf = 6%, RPm = 5%, and the firm's beta is 1.2? if Do = $3.75, Po = $40, and g = 6%, using the DCF method, what is the cost of common equity?

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#### Solution Preview

In the CAPM method, the formula for calculating the cost of equity Ke is

Ke = Risk Free Rate + Risk Premium X ...

#### Solution Summary

The solution explains the calculation of cost of common equity using the CAPM method and the DCF method

$2.19