Samsung's stock has a beta of 2.0, the risk-free rate is 2%, and the expected return...

Question

Question

Samsung's stock has a beta of 2.0, the risk-free rate is 2%, and the expected return is 9%. What is Samsungs cost of equity capital?

business finance

Answer 1

Answer #1

The following information is given in the problem

Samsung's beta =β = 2.0

The risk free rate = Rf = 2%

The expected return = Rm = 9%

The Capital Asset Pricing Model holds good for the given scenario

Samsung's Cost of Equity capital = Rf + (β*Rm)

= 2% + (2.0 * 9%)

= 2% + 18%

= 20%

Therefore, Samsung's cost of Equity capital is 20%

Answer 2

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