Assume a firm has a beta of 1.2.All else held constant,the cost of equity for this firm will increase if the:

Question

Quizplus · Accepted Answer

The cost of equity for a firm is calculated as the risk-free rate plus the product of the market risk premium and the firm's beta. Therefore, if all else is held constant and the risk-free rate decreases, the cost of equity for the firm will increase. This is because the lower risk-free rate will result in a lower overall discount rate, which increases the cost of equity. None of the other choices listed will have an impact on the cost of equity for the firm, as they do not directly affect the calculation of the cost of equity.

Assume a Firm Has a Beta of 1