The common stock of Kansas City Power and Light has a beta of 0.80.The Treasury bill rate is 4 percent and the market risk premium is 8 percent.What is their cost of equity capital?

Question

Quizplus · Accepted Answer

The cost of equity capital can be calculated using the Capital Asset Pricing Model (CAPM), which is: 
Cost of Equity = Risk-Free Rate + Beta*(Market Risk Premium)
Substituting the given values: 
Cost of Equity = 4% + 0.80*(8%) 
Cost of Equity = 10.4%
Therefore, the correct answer is B) 10.4 percent.

The Common Stock of Kansas City Power and Light Has