Given the following information, what is the cost of equity for the Teevox Corporation? Expected return in the domestic market is 12%, the risk-free rate of return is 4%, the firm's beta is 1.1, and the required return on debt for the firm is 7%.

Question

Quizplus · Accepted Answer

The cost of equity (Re) can be calculated using the capital asset pricing model (CAPM):

Re = Rf + β(Rm - Rf)

Where:
Rf = risk-free rate = 4%
β = beta = 1.1
Rm = expected return in the domestic market = 12%

Using the above formula, we get:

Re = 4% + 1.1(12% - 4%) = 8.8%

Therefore, the cost of equity for Teevox Corporation is 8.8%.

Given the Following Information, What Is the Cost of Equity