We consider 2 companies A and B whose economic activity is identical, but they differ in their financial structure Their is equal to 1 2 The risk free rate is 7 and the average market rate of return is 15 The marginal tax rate is 20 Firm A has not in debt and firm B has a debt equity mix of 30 What...

The cost of equity of a company can be calculated using the capital asset pricing model CAPM which t ...

We consider 2 companies A and B whose economic activity is identical, but they differ in their

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We consider 2 companies A and B whose economic activity is identical, but they differ in their financial structure. Their β is equal to 1.2. The risk-free rate is 7% and the average market rate of return is 15%. The marginal tax rate is 20%. Firm A has not in debt and firm B has a debt equity mix of 30%.

What is the cost of equity of company B?