Use the table for the question(s)below.
Capital Structure and Unlevered Beta Estimates for Comparable Firms
-If the risk-free rate of interest is 6% and the market risk premium has historically averaged 5%,then the cost of capital for Oakley is closest to:
A)13.5%.
B)10.2%.
C)9.1%.
D)14.7%.

Question

Use the table for the question(s)below.
Capital Structure and Unlevered Beta Estimates for Comparable Firms 
-If the risk-free rate of interest is 6% and the market risk premium has historically averaged 5%,then the cost of capital for Oakley is closest to:
A)13.5%. 
B)10.2%. 
C)9.1%. 
D)14.7%.

Quizplus · Accepted Answer

The cost of capital is the risk-free rate plus the market risk premium. So, the cost of capital for Oakley is 6% + 5% = 11%.

Use the Table for the Question(s)below