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%

If you need any clarification, you can ask in comments.     

If you like my answer, then please up-vote as it will be motivating

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
JaiLai Cos. stock has a beta of 0.7, the current risk-free rate is 6.3 percent, and...
JaiLai Cos. stock has a beta of 0.7, the current risk-free rate is 6.3 percent, and the expected return on the market is 14 percent. What is JaiLai’s cost of equity
A stock has expected return of 12.0 percent, the risk free rate is 3.00 percent, and...
A stock has expected return of 12.0 percent, the risk free rate is 3.00 percent, and the market risk premium 4.00. What must be the stock beta? What is the equity risk premium for the stock? What is the return on market portfolio? Draw the Security Market line: show the risk free rate, return on the stock and return on the market portfolio
Q#25 The beta of Ricci Co.'s stock is 2.8, whereas the risk-free rate of return is...
Q#25 The beta of Ricci Co.'s stock is 2.8, whereas the risk-free rate of return is 8 percent. If the expected return on the market is 17 percent, then what is the expected return on Ricci Co.? Suppose this stock has an expected return of 40%. Is this security properly priced? A) 42.80%, overpriced B) 33.20%, overpriced C) 42.80%, underpriced D) 33.20%, underpriced
2) A stock has an expected return of 10.2 percent, the risk-free rate is 3.9 percent,...
2) A stock has an expected return of 10.2 percent, the risk-free rate is 3.9 percent, and the expected return on the market is 11.10 percent. What must the beta of this stock be? (5 points) Is it more or less risky than average? (5 points) Explain what is that the beta coefficient measures. (5 points) 3) A company currently has a cost of equity of 17.8 percent. The market risk premium is 10.2 percent and the risk-free rate is...
A stock has an expected return of 12.3 percent, the risk-free rate is 4.4 percent, and...
A stock has an expected return of 12.3 percent, the risk-free rate is 4.4 percent, and the market risk premium is 8.98 percent. What is the stocks beta ?
The stock of WeAllWantToBeFinanceStudents Company has a beta of 0.5. The current risk-free rate of return...
The stock of WeAllWantToBeFinanceStudents Company has a beta of 0.5. The current risk-free rate of return is 2.75% and the market risk premium is 6%. SHOW ALL WORK FOR FULL CREDIT. a) (6 pts) What is the required rate of return on this stock? b) (4 pts) If the expected rate of return on the stock investment is 6%, is this a good buy or a bad buy? Explain fully.
The company's stock has a beta equal to 1.22 , the risk-free rate is 4.5 percent,...
The company's stock has a beta equal to 1.22 , the risk-free rate is 4.5 percent, and the market risk premium is 7.0 percent. What is your estimate of the stock's required rate of return? Answer in a percentage without the % sign, and round it to two decimal places, i.e., 10.54 for 10.54% (or 0.1054). A company has just paid a dividend of $ 3 per share, D0=$ 3 . It is estimated that the company's dividend will grow...
1. The risk-free rate is 2.3% and the market risk premium is 5.5%. A stock has...
1. The risk-free rate is 2.3% and the market risk premium is 5.5%. A stock has a beta of 1.3, what is its expected return of the stock? (Enter your answers as a percentage. For example, enter 8.43% instead of 0.0843.) 2. Calculate the expected return on a stock with a beta of 1.59. The risk-free rate of return is 4% and the market portfolio has an expected return of 10%. (Enter your answer as a percentage. For example, enter...
Blossom Industries common stock has a beta of 1.2. If the market risk-free rate is 4.6...
Blossom Industries common stock has a beta of 1.2. If the market risk-free rate is 4.6 percent and the expected return on the market is 9.1 percent, what is Blossom’s cost of common stock? (Round answer to 1 decimal places, e.g. 15.2%.) Cost of common stock %
The Up and Coming Corporation's common stock has a beta of 1. If the risk-free rate...
The Up and Coming Corporation's common stock has a beta of 1. If the risk-free rate is 3 percent and the expected return on the market is 15 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.) 18% 15% 15.75% 14.25% 15.6% *If possible, could you solve in excel and show the formulas? Thank you!