Task: Given the beta of your company (the company in question is eBay), the present yield to maturity on U.S. government bonds maturing in one year (currently about 4.5% annually) and an assessment that the market risk premium (that is - the difference between the expected rate of return on the 'market portfolio' and the risk-free rate of interest) is 6.5%, use the CAPM equation in order to find out what is the present 'cost of equity' of your company? Explain what the meaning of the 'cost of equity' is.© BrainMass Inc. brainmass.com June 3, 2020, 9:28 pm ad1c9bdddf
CAPM = rf + (rp)*beta
rf = ytm of risk free security like treasury bond = 4.5%
rp = market risk premium = 6.5%
beta = 2.43
Note: No Beta figure was included, so I got the ...
This solution is comprised of a 120 word response which illustrates how to calculate the cost of equity for eBay. All of the required formulas and variables have been included.