Preston knows his firm's stock has a beta of 1.17, and he'd like to use the CAPM to estimate the cost of equity. If the expected market risk premium is 8.7% and the current T-Bill rate is 2.5%, what should he use as the estimate for the cost of equity? Enter your answer as a decimal and show 4 decimal places. For example, if your answer is 15.55%, enter .1555.

Preston knows his firm's stock has a beta of 1.17, and he'd like to use the CAPM to estimate the cost of equity. If the expected market risk premium is 8.7% and the current T-Bill rate is 2.5%, what should he use as the estimate for the cost of equity? Enter your answer as a decimal and show 4 decimal places. For example, if your answer is 15.55%, enter .1555.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

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Subject :- Finance Preston knows his firm's stock has a beta of 1.17, and he'd like to use the CAPM to estimate the cost of equity. If the expected market risk premium is 8.7% and the current T-Bill rate is 2.5%, what should he use as the estimate for the cost of equity? Enter your answer as a decimal and show 4 decimal places. For example, if your answer is 15.55%, enter .1555.
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