The cost of equity capital of a firm is 16%. If market rate of return is 15% and risk free rate of…
The firm's beta is 1.20. Under the capital asset pricing model, \(k_e=r_f+\beta(r_m-r_f)\). Hence \(\beta\) \(=(16-10)/(15-10)\) \(=6/5\) \(=1.20\).
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The cost of equity capital of a firm is 16%. If market rate of return is 15% and risk free rate of return is 10%, then what would be the value of firm’s beta ()?
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Correct answer D
The firm's beta is 1.20. Under the capital asset pricing model, . Hence .
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West Bengal SET (WB SET)