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 can be calculated using the Capital Asset Pricing Model (CAPM):
Cost of Equity = Risk-Free Rate + Beta*(Expected Return - Risk-Free Rate)
Cost of Equity = 4% + 1.1*(12% - 4%)
Cost of Equity = 12.80%

Given the Following Information, What Is the Cost of Equity