The Up and Coming Corporation\'s common stock has a beta of 1. If the risk-free

Question

The Up and Coming Corporation's common stock has a beta of 1. If the risk-free rate is 3.5 percent and the expected return on the market is 9 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)

A. 9.45%

B. 8.55%

C. 9.36%

D. 9%

E. 12.5%

The Up and Coming Corporation's common stock has a beta of 1. If the risk-free rate is 3.5 percent and the expected return on the market is 9 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)

A. 9.45%

B. 8.55%

C. 9.36%

D. 9%

E. 12.5%

Explanation / Answer

Cost of equity capital = Risk free rate + Beta * ( Return on market - Risk free rate)

= 3.5 + 1 ( 9 - 3.5)

= 3.5 + 1 * 5.5

= 9%

Conclusion:- Company's cost of equity capital = 9%. (Option D)

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