Indicate the cost of equity capital based on capital asset pricing model with the following information. Beta coefficient 1.40 Risk free rate of interset 9% Expected rate of return on equity in the market 16%
A. 98%
B. 18%
C. 18.8%
D. 16%
Answer: Option C
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cost of equity in cost of asset pricing model formula is
ke = Rf- beta (Rm-Rf)
ke = 9+1.40(16-9)=18.8 percentage