Question
You are a junior financial executive for Lockheed Martin. The CFO is assessing the companys weighted average cost of capital and wants your help estimating
You are a junior financial executive for Lockheed Martin. The CFO is assessing the companys weighted average cost of capital and wants your help estimating the current cost of equity. To estimate the cost of equity, use the following standards:
The cost of equity equals the required return based on the CAPM
The proxy for the market is the S&P 500
The proxy for the risk-free rate is the 1-month T Bill
Use 5 years of monthly data to estimate beta
The market return over the next year is expected to be equal to the market return over the past year
The risk-free rate over the next year is expected to be 0 Based on this information, what is Lockheed Martins current cost of equity?
Based on this information, what is Lockheed Martins current cost of equity?
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