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Gnome Capital a Canadian consortium has a foreign project with a beta of 1.18, risk-free return...

Gnome Capital a Canadian consortium has a foreign project with a beta of 1.18, risk-free return of 13.2 percent and the market’s required return of 20.15 percent. Calculate the cost of equity for the project.

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Answer #1

We can use Capital Asset Pricing Model (CAPM) to find the cost of equity.

Where,
ke = Cost of equity
Rf = Risk-free rate
Rm = Market rate
= Beta

Substituting the values, we get:

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