Question

Steady​ Company's stock has a beta of 0.18. If the​ risk-free rate is 6.1 % and the market risk premium is 6.9 %​, what is an estimate of Steady​ Company's cost of​ equity? g

Answer 1

Answer:

Steady​ Company's cost of​ equity is estimated to be 7.342%

Explanation:

The cost of equity is the return that is required by the holders of common stock in the company.

Cost of Equity = Return on Risk free Securities + Beta × Risk Premium

                       =  6.1 % + 0.18 × 6.9 %

                       = 7.342%

Therefore, Steady​ Company's cost of​ equity is estimated to be 7.342%.