You are seeking to determine the cost of equity for a public

You are seeking to determine the cost of equity for a publicly traded company and are given the following information: Risk free rate of 5.0%, Beta of 1.10x, equity risk premium of 4.0%. What is the cost of equity?

Question 19 options:

9.00%

9.40%

9.50%

9.90%

Solution

cost of equity=Risk free rate+Beta*equity risk premium

=5+(1.1*4)

which is equal to

=9.40%