Cost of Capital - CAPM The Inception, Inc wishes to calculate the cost of common stock...
Cost of Capital - CAPM
The Inception, Inc wishes to calculate the cost of common stock equity. The analysts indicate that the risk-free is 5%, the prime rate is 8%, the firm's beta is 1.2 and the market rate is 12%.
Please show the work.
Homework Answers
Cost of Equity = risk free rate+(market rate-risk free rate)*beta
= 5+(12-5)*1.2
= 5+ 7*1.2
= 5+8.4
= 13.4
Therefore cost of equity is 13.4%
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Cost of Capital - CAPM
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