You have been hired as a consultant by Feludi Inc.'s CFO, who wants you to help...

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You have been hired as a consultant by Feludi Inc.'s CFO, who wants you to help...

You have been hired as a consultant by Feludi Inc.'s CFO, who wants you to help her estimate the cost of capital. You have been provided with the following data: r_RF = 4.10%; RP_M = 5.25%; and b = 1.30. Based on the CAPM approach, what is the cost of common from reinvested earnings?

a. 9.97%

b. 10.60%

c. 10.28%

d. 9.67%

e. 10.93%

business finance

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Answer 1

Answer #1

cost of common equity=risk free rate+Beta*market risk premium

=4.1+(5.25*1.3)

which is equal to

=10.93%(Approx).

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Answer 2

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