In 2021, the risk-free rate as represented by the annual return on a 10-year treasury bond...

 

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In 2021, the risk-free rate as represented by the annual return on a 10-year treasury bond was 0.08.XYZ beta was 1.78 as of Dec 31, 2021. Meanwhile, the average market risk is roughly 0.07. What is the Expected Rate of Return of Equity? Suppose a company uses only debt and internal equity to Finance its capital budget and uses CAPM to compute its cost of equity. Company estimates that its WACC is 0.02. The capital structure is 0.40 debt and 0.60 internal equity. Before tax cost of debt is 0.03 and tax rate is 0.35. Market Risk Premium = 0.06 and beta = 0.03: What is the Risk Free Rate of the company? In 2021, the risk-free rate as represented by the annual return on a 10-year treasury bond was 0.08.XYZ beta was 1.78 as of Dec 31, 2021. Meanwhile, the average market risk is roughly 0.07. What is the Expected Rate of Return of Equity? Suppose a company uses only debt and internal equity to Finance its capital budget and uses CAPM to compute its cost of equity. Company estimates that its WACC is 0.02. The capital structure is 0.40 debt and 0.60 internal equity. Before tax cost of debt is 0.03 and tax rate is 0.35. Market Risk Premium = 0.06 and beta = 0.03: What is the Risk Free Rate of the company?

Answer rating: 100% (QA)

To calculate the expected rate of return of equity using the Capital Asset Pricing Model CAPM we can ... View the full answer