Answered step by step
Verified Expert Solution
Question
1 Approved Answer
8. The ZZZ Corporation is all-equity financed, and it has a market value of assets of $100 million. The risk-free rate is 5% per year.
8. The ZZZ Corporation is all-equity financed, and it has a market value of assets of $100 million. The risk-free rate is 5% per year. The market-beta of the company's common stock is 1.5, the SMB-beta is -0.5, and the HML-beta is 0.3. The market (MKT) risk premium is 6%, the risk premium on SMB is 3%, and the risk premium on HML is 5%. What is the company's cost of equity capital based on the Fama-French three-factor model?
A. 6.0% B. 11.0% C. 14.0% D. 17.0%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started