Question
The current estimate of market risk premium is 6%. The volatility of the company's stock is 30%. Beta is 2.5. The following shows the current
The current estimate of market risk premium is 6%. The volatility of the company's stock is 30%. Beta is 2.5.
The following shows the current market data of treasury securities.
Yield of 3-month Treasury Bill = 0.03%
Yield of 5-year Treasury Note = 0.5%
Yield of 10-year Treasury Note = 1.2%
Yield of 30-year Treasury Note = 1.9%
Q) Apply CAPM and estimate the company's cost of equity.
Step by Step Solution
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Solution The CAPM formula is re rf x rm rf where re cost of equity rf riskfree r...
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
