Question

CJ Co stock has a beta of .96 the current risk-free rate is 5.66 percent, and...

CJ Co stock has a beta of .96 the current risk-free rate is 5.66 percent, and the expected return on the market is 13.06percent. What is CJ Co’s cost of equity?

Homework Answers

Answer #1

As per CAPM,

Rf = Risk free Return = 5.66%                                                    

Rm = Market return = 13.06%

B = Beta of STock = 0.96

Required rate of Return = 5.66% + 0.96(13.06% - 5.66%)

= 12.764%

So, CJ Co's cost of equity is 12.764%

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