JaiLai Cos. stock has a beta of 1.7, the current risk-free rate is 6.2 percent,

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%