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Loka Corp. is an all-equity firm (no debt and no preferred equity). Calculate the cost of capital of Loka Corp. using both CAPM and DM
Loka Corp. is an all-equity firm (no debt and no preferred equity). Calculate the cost of capital of Loka
Corp. using both CAPM and DM and give your final answer for Loka's WACC as the average of both.
Loka's stock trades at $50 and has a beta of 1.2. The risk-free rate is 3.5% and the market risk premium
is 6%. Loka also recently paid a $3.06 dividend, which is expected to grow at a rate of 3% per year.
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