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A: As per CAPM Cost of equity = Risk free rate + beta * Market risk premium
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A: We need to compute the expected rate of return for asset E in this question.
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A: Solution Note Dear student as per the Q&A guideline we are required to answer the first question…
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A: Expected return = Risk free rate + beta * (market return - risk free rate )
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A: As per CAPM, Cost of equity = Risk free Rate + Beta * (Market return - Risk free Rate)
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Q: The asset's market risk premium is
A: Market risk premium = Return on market portfolio - Risk free rate of return
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30. Please help me to answer this. thank you
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- Using Capital Asset Pricing Method (CAPM), compute for the cost of capital (equity) with risk-free rate of 4%, market return of 8% and Beta of 1.75 a. 13.00% b. 12.00% c. 11.00% d. 10.00%Assume that the Collins Company has a beta of 1.8 and that the risk-free rate of return is 2.5 percent. If the equity-risk premium is six percent, calculate the cost of equity for the Collins Company using the capital asset pricing model.XYZ has a beta coefficient of 1.76. Estimate its cost of equity if the risk-free rate is 8% and return on the broad market index is 16%. Calculate the cost of equity.
- Suppose that the capital asset pricing model (CAPM) applies. The risk premium of a stock is 3 percent and the risk premium of the market portfolio is 2. The standard deviation of the market portfo- lio is 6. Compute the covariance between the stock and the market portfolio.The estimated beta (β) of a firm is 1.7. The market return (rm) is 14 %, and the risk-free rate (rf) is 7%. Estimate the cost of equity (ie).The risk-free rate is 1.45% and the market risk premium is 5.21%According to the Capital Asset Pricing Model (CAPM ), a stock with a beta of 1.13 will have an expected return of %.
- I need to calculate the cost of equity with the following data: The current appropriate risk-free rate is 6% and the return on the market is 13.5%. levered beta is 1.29. Using the CAPM, estimate DE’s cost of equity. Be sure to state any additional assumptionsVargo, Inc., has a beta estimated by Value Line of 1.3. The current risk-free rate (long-term) is 3.5 percent and the market risk premium is 6.4 percent. What is the cost of common equity for Vargo?Suppose the current risk -free rate of return is 5 percent and the expected market risk premium is 7 percent. Using this information, estimate the cost of retained earnings for a company with a beta coefficient equal to 2.0?
- In an economy where the risk-free interest rate is 19% and the expected return of the market is 25%, the beta coefficients of A, B, C and D stocks and the expected returns announced by the companies are as follows. According to the Financial (Capital) Assets Pricing Model c) Calculate the expected return rates of the shares.d) Determine which stocks can be invested by comparing the expected return announced by the company with the expected return you calculated.Suppose your company has an equity beta of .62 and the current risk-free rate is 4.1%. If the expected market risk premium is 9.6%, what is your cost of equity capital?If the annual geometric mean for the equity risk premium is 8.4 percent, what percentage of the equity risk premium is consumed by trading costs of 1.2 percent?
