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# Cost of Equity, WACC, and Unlevered Cost of Equity

1. Find the beta for your bank of america using this website (http://finance.yahoo.com/q/ks?s=AIG)
2. Estimate bank of america's cost of equity.
3. Estimate bank of americas weighted average cost of capital.
4. Estimate bank of americas unlevered cost of equity.
Show your calculations in an Excel document. Be sure to label each calculation clearly.

#### Solution Summary

A stock's beta is a ratio indicating market volatility; how the stock fluctuates compared to the market. A beta of 1 indicates healthy market fluctuations. A beta of less than 1 indicates the stock is affected by market fluctuations.

Cost of equity is the required return an investor expects to see from a company. It is calculated as: cost of equity = dividends per share/current market value of stock + growth rate of dividends.

WACC tells us how much interest a company is paying for every dollar financed. It is calculated as: WACC = (debt/debt + equity))*cost of debt + (equity/(debt + equity))*cost of equity

Unlevered cost of equity evaluates the cost of a capital project assuming the company is debt free. The formula looks like this: RE = RF + ?E (RM - RF).

Solution contains detailed systematic information.

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