What is value of cost of equity if risk-free rate is 6 percent, market risk premium is 9 percent and…
According to the Capital Asset Pricing Model (CAPM), Cost of Equity (Ke) = Risk-Free Rate (Rf) + Beta * Market Risk Premium (Rm - Rf). Substituting the given values: Ke = 6%…
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What is value of cost of equity if risk-free rate is 6 percent, market risk premium is 9 percent and beta is 1.54?
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Correct answer A
According to the Capital Asset Pricing Model (CAPM), Cost of Equity (Ke) = Risk-Free Rate (Rf) + Beta * Market Risk Premium (Rm - Rf). Substituting the given values: Ke = 6% + (1.54 * 9%) = 6% + 13.86% = 19.86%.
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UGC NET Commerce