Wal-Mart plans to open a new store near Campus. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 3 million dollars are going to be financed via stock market. Wal-Mart’s beta is 0.70. Three month Treasury Bill rate is 2% (risk free rate) and the S&P500 index return is 8% (market return). How much is the cost of equity to Wal-Mart stockholders?

Wal-Mart plans to open a new store near Campus. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 3 million dollars are going to be financed via stock market. Wal-Mart’s beta is 0.70. Three month Treasury Bill rate is 2% (risk free rate) and the S&P500 index return is 8% (market return). How much is the cost of equity to Wal-Mart stockholders?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 6P

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