Cost ofequity: SML. Stan is expanding his business and will sell common stock for the needed funds. If the currentrisk-free rate is 6.5% and the

Cost of​ equity: SML.  Stan is expanding his business and will sell common stock for the needed funds. If the current​ risk-free rate is 6.5​% and the expected market return is 15.2​%, the cost of equity for Stan is

a.

11.63​% if the beta of the stock is 0.59

b.  

14.42​% if the beta of the stock is 0.91

c.  

15.72​% if the beta of the stock is 1.06

d.  

17.90​% if the beta of the stock is 1.31

Suppose Stan had to delay the sale of the common stock for six months. When he finally did sell the​ stock, the​ risk-free rate had fallen to5.5​%, but the expected return on the market had risen to

16.2​%. What was the effect on the cost of equity by waiting six​ months, using the four different​ betas? What do you notice about the increases in the cost of equity as beta​ increases?

a.  What is the new cost of equity if the beta of the stock is

0.59​?

b. What is the new cost of equity if the beta of the stock is .91?

c. What is the new cost of equity if the beta of the stock is 1.06?

D. What is the new cost of equity if the beta of the stock is 1.31?