Assuming the CAPM or one-factor model holds,what is the cost of equity for a firm if the firm's equity has a beta of 1.2,the risk-free rate of return is 4%,the expected return on the market is 10%,and the return to the company's debt is 7%?
A) 11.2%
B) 11.4%
C) 12.8%
D) 12.9%
E) None of these.

Question

Quizplus · Accepted Answer

The Answer of Assuming the CAPM or one-factor model holds,what is the cost of equity for a firm if the firm's equity has a beta of 1.2,the risk-free rate of return is 4%,the expected return on the market is 10%,and the return to the company's debt is 7%?
A) 11.2%
B) 11.4%
C) 12.8%
D) 12.9%
E) None of these.

Assuming the CAPM or One-Factor Model Holds,what Is the Cost