Faux Corp Stock Over the Last 10 years - Beta = 1.1 - Market Risk premium = 10% - Current risk-free rate 3% - Last dividend $5 - Current Stock Price $30 Dividend History 2016 - $4.20 2017 - $4.40 2018 - $4.55 2019 - $4.75 2020 - $5.00 1. Calculate the cost of equity using SML
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Faux Corp Stock Over the Last 10 years
- Beta = 1.1
- Market Risk premium = 10%
- Current risk-free rate 3%
- Last dividend $5
- Current Stock Price $30
Dividend History
2016 - $4.20
2017 - $4.40
2018 - $4.55
2019 - $4.75
2020 - $5.00
1. Calculate the
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