The cost of equity for Ryan Corporation is 8.4%. If the expected return on the market is 10% and the risk-free rate is 5%,then the equity beta is ___.

Question

Quizplus · Accepted Answer

The equation for the cost of equity using the Capital Asset Pricing Model (CAPM) is:

Cost of Equity = Risk-Free Rate + Beta * (Expected Return on Market - Risk-Free Rate)

Substituting the given information, we get:

8.4% = 5% + Beta * (10% - 5%)
3.4% = Beta * 5%
Beta = 3.4% / 5% = 0.68

Therefore, the equity beta is 0.68, which is option B.

The Cost of Equity for Ryan Corporation Is 8