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Cost of equity using CAPM

What is the cost of equity of a firm that has a beta of 1.98 and a dividend yield of 6.58%? Assume the risk free rate is 4.43% and the return last year of the S&P500 was 12.29%.

a. 3.04%
b. 3.23%
c. 14.69%
d. 17.22%

Solution Preview

What is the cost of equity of a firm that has a beta of 1.98 and a dividend yield of 6.58%? Assume the risk free rate is 4.43% and the return last year of the S&P500 was 12.29%. ...

Solution Summary

The solution calculates Cost of equity using CAPM (Capital Asset Pricing Model) equation.

$2.19