TJ Co stock has a beta of 1.45, the current risk-free rate is 5.75, and the expected return on the market is 14 percent. What is TJ Co's cost of equity?
A) 17.71%
B) 21.20%
C) 26.05%
D) 28.64%

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 * (Market Return - Risk-Free Rate). Substituting the given values: 5.75 + 1.45 * (14 - 5.75) = 17.71%.

TJ Co Stock Has a Beta of 1