Aluminum maker Alcoa has a beta of about 1.93, whereas Hormel Foods has a beta of 0.31. If the expected excess returm of the market portfolio is 5%, which of these firms has a higher equity cost of capital, and how much higher is it? Alcoa's equity cost f capital is %. (Round to two decimal places.) Hormel's equity cost of capital is "%. (Round to two decimal places.) Therefore has the higher equity cost of capital by percentage points. (Select from the drop-down menus and round to two decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Aluminum maker Alcoa has a beta of about 1.93, whereas Hormel Foods has a beta of 0.31. If the expected excess retum of the market portfolio is 5%, which of these firms has a higher equity cost of
capital, and how much higher is it?
Alcoa's equity cost of capital is
%. (Round to two decimal places.)
Hormel's equity cost of capital is
"%. (Round to two decimal places.)
Therefore,
V has the higher equity cost of capital byO percentage points. (Select from the drop-down menus and round to two decimal places.)
Alcoa
Hormel
Transcribed Image Text:Aluminum maker Alcoa has a beta of about 1.93, whereas Hormel Foods has a beta of 0.31. If the expected excess retum of the market portfolio is 5%, which of these firms has a higher equity cost of capital, and how much higher is it? Alcoa's equity cost of capital is %. (Round to two decimal places.) Hormel's equity cost of capital is "%. (Round to two decimal places.) Therefore, V has the higher equity cost of capital byO percentage points. (Select from the drop-down menus and round to two decimal places.) Alcoa Hormel
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