Question

Question 1: Assuming that the riskless rate is 2.3% and the market premium is 5.3%, calculate Zonk’s cost of equity capital: A. 10.4% B. 7.69% C. 11.89% D. 8.28%

Answer 1

Answer:

D. 8.28%

Explanation:

Cost of equity capital = risk free rate + (beta*market premium)

                                    = 2.3% + (1.13*5.3%)

                                    = 8.28%

Therefore, Zonk’s cost of equity capital is 8.28%