JaiLai Cos. stock has a beta of 1.7, the current risk-free rate is 6.2 percent, and the expected return on the market is 11 percent. What is JaiLai’s cost of equity?
Cost of equity using CAPM
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Cost of equity = Rf + beta (Rm -Rf)
Cost of equity = 6.2% + 1.7(11% – 6.2%) = 14.36%
Answer : 14.36%