Question
What is the estimate for the cost of equity? Provide the following inputs that you used and why. Risk premium Risk-free rate Beta of equity
What is the estimate for the cost of equity? Provide the following inputs that you used and why.
- Risk premium
- Risk-free rate
- Beta of equity for Boeing
The case does not give you the RF (Risk-Free) and RPM (Risk Premium on the Market) at the end of 2002. Also, you are not supposed to get this from outside the case. Therefore, use the information given below to decide on the RF rate RPM for the CAPM. The data were based on December 31, 2002.
T-Bill Yield | 0.85% (annual) |
T-Bond Yield (30 Yr) | 4.56% (annual) |
- Equity Market Risk Premium
Risk premium over T-Bill | 8.40% (annual) |
Risk premium over T-Bond | 6.40% (annual) |
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The one way that the companies as well as the investors can estimate the cost of the equity is throu...
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Intermediate Financial Management
Authors: Brigham, Daves
10th Edition
978-1439051764, 1111783659, 9780324594690, 1439051763, 9781111783655, 324594690, 978-1111021573
