The current estimate of market risk premium is 6%. The volatility of the company's stock is 30%. Beta is 2.5.

The following shows the current market data of treasury securities.

Yield of 3-month Treasury Bill = 0.03%

Yield of 5-year Treasury Note = 0.5%

Yield of 10-year Treasury Note = 1.2%

Yield of 30-year Treasury Note = 1.9%

Q) Apply CAPM and estimate the company's cost of equity. 

Answer rating: 100% (QA)

Solution The CAPM formula is re rf x rm rf where re cost of equity rf riskfree r... View the full answer