Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Sheridan Industries common stock has a beta of 1.2. If the market risk-free rate is 5.2 percent and the expected return on the market is
Sheridan Industries common stock has a beta of 1.2. If the market risk-free rate is 5.2 percent and the expected return on the market is 8.2 percent, what is Sheridans cost of common stock?
I solved this problem incorrectly by doing
Kes=Rrf+(Betaesx market risk premium)
Kes=0.052+(1.2x0.082)
Kes=0.052+0.098400
Kes=0.1504=15.0%
I'm not sure what I am doing wrong. Please show full calculation.
X Your answer is incorrect. Sheridan Industries common stock has a beta of 1.2. If the market risk-free rate is 5.2 percent and the expected return on the market is 8.2 percent, what is Sheridan's cost of common stock? (Round answer to 1 decimal places, e.g. 15.2%.) Cost of common stock 15.0Step 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