Computation of cost of equity
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2) Appendix 11A, Problem 11A-1 capital asset pricing model (debt to equity relationship)
11A-1. Assume that Rf _ 5 percent and Km _ 10.5 percent. Compute Kj for the following betas, using Formula 11A-2.
a. 0.6
b. 1.3
c. 1.9
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This provides the steps of Computation of cost of equity
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COST OF equity=Kj
Kj = Rf+b(Km-Rf)
Rf= Risk free ...
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