Question
The current risk-free rate of return (rRFrRF) is 3.86% while the market risk premium is 6.63%. The Roosevelt Company has a beta of 0.92. Using
The current risk-free rate of return (rRFrRF) is 3.86% while the market risk premium is 6.63%. The Roosevelt Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach, Roosevelts cost of equity is __________
The Jackson Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a companys cost of internal equity. Jacksons bonds yield 11.52%, and the firms analysts estimate that the firms risk premium on its stock over its bonds is 4.95%. Based on the bond-yield-plus-risk-premium approach, Jacksons cost of internal equity is:
16.47%
15.65%
19.76%
20.59%
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