The Lenzie Corporation’s common stock has a beta of 1.60. If the risk-free rate is 6.1%...
The Lenzie Corporation’s common stock has a beta of 1.60. If the risk-free rate is 6.1% and the expected return on the market is 11%, what is the company’s cost of equity capital?
Homework Answers
Cost of equity capital = Risk-free rate + Beta(Expected return on the market - Risk-free rate)
Cost of equity capital = 0.061 + 1.60(0.11 - 0.061)
Cost of equity capital = 0.1394 or 13.94%
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