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The Rhaegel Corporation’s common stock has a beta of 1.07. If the risk-free rate is 3.5 percent and the expected return on the market is 10 percent, what is the company’s cost of equity capital?

Respuesta :

Answer:

10.46%

Explanation:

Using CAPM formula, we have the following

Cost of equity = risk-free rate + Beta x (Market risk premium)

                        = 3.5% + 1.07 x (10% - 3.5%)

                        = 10.46%

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