For an unlevered firm, the cost of capital can be determined by using the ________.

Question

Quizplus · Accepted Answer

For an unlevered firm, the cost of capital can be determined using the Capital Asset Pricing Model (CAPM), which uses the risk-free rate, the market risk premium, and the asset's beta to calculate the required rate of return. The yield on the traded debt, dividend yield, and preferred stock yield are not relevant for an unlevered firm's cost of capital calculation.

For an Unlevered Firm, the Cost of Capital Can Be