You are trying to determine the cost of equity for a publicly traded company.Which of the following is least useful?

Question

Quizplus · Accepted Answer

The historical beta for a firm may be useful as an initial estimate, but it may not accurately reflect the current or future risk profile of the company. The other options - A) the 3-month Treasury bill rate, B) the risk premium on the market, and D) the expected rate of return on a stock of similar risk - are all useful in determining the cost of equity. The 3-month Treasury bill rate is used as a proxy for the risk-free rate, the risk premium on the market helps determine the expected return on the overall stock market, and the expected rate of return on a stock of similar risk is used as a benchmark for comparison purposes.

You Are Trying to Determine the Cost of Equity for a Publicly