Your estimate of the market risk premium is 6%. The risk-free rate of return is 4% and General Motors has a beta of 1.4. What is General Motors' cost of equity capital?

Name: Your estimate of the market risk premium is 6%. The risk-free rate of return is 4% and General Motors has a beta of 1.4. What is General Motors' cost of equity capital?
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Question

Quizplus · Accepted Answer

B) Apply the CAPM equation.
Cost of equity = 0.04 + (1.4 × 0.06) = 0.124 = 12.4%

Your Estimate of the Market Risk Premium Is 6