Biogen, a biotechnology firm, had a beta of 1.70 in 1995. It had no debt outstanding at the end of
Biogen, a biotechnology firm, had a beta of 1.70 in 1995. It had no debt outstanding at the end of that year.
a. Estimate the cost of equity for Biogen, if the Treasury bond rate is 6.4%.
b. What effect will an increase in longterm bond rates to 7.5% have on Biogen's cost of equity?
c. How much of Biogen's risk can be attributed to business risk?Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...
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