The Dybvig Corporation’s common stock has a beta of 1.4. If the risk-free rate i

Question

The Dybvig Corporation’s common stock has a beta of 1.4. If the risk-free rate is 5.4 percent and the expected return on the market is 12 percent, what is Dybvig’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  Cost of equity capital

%

The Dybvig Corporation’s common stock has a beta of 1.4. If the risk-free rate is 5.4 percent and the expected return on the market is 12 percent, what is Dybvig’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

cost of equity capital=Risk free rate+Beta*(MArket rate-Risk free rate)

=5.4+1.4*(12-5.4)

=14.64%

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