Example of capital asset pricing model, Finance Basics

Example of Capital Asset Pricing Model

KK Ltd is an all equity firm whose Beta factor is 1.2, the interest rate on T. bills is currently at 8.5% and the market rate of return is 14.5%.  Conclude the cost of equity Ke, for the company.

Solution

Rf = 8.5% , Rm = 14.5%  and Beta of equity = 1.2

Ke   = Rf + (Rm - Rf)BE

       = 8.5% + (14.5% - 8.5%) 1.2

       = 8.5% + (6%)1.2

       = 15.7%

Posted Date: 1/30/2013 4:23:14 AM | Location : United States







Related Discussions:- Example of capital asset pricing model, Assignment Help, Ask Question on Example of capital asset pricing model, Get Answer, Expert's Help, Example of capital asset pricing model Discussions

Write discussion on Example of capital asset pricing model
Your posts are moderated
Related Questions
A new pet shop wants to apportion their investment money $132,000 for advertising, building upgrades, and education in the ratio of 5:4:3. How much money does each category get app

#questioxcvxcvn..

WHat are the expected rates of reimbursement for this time frame for each player ?

The Audiology Department at Randall Clinic offers many services to the clinic’s patients. The three most common , along with cost and utilization data, are as follows: Service Var

You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 13 percent, which is pai

Types of jobbers in Stock Market There are three kinds of jobbers as: a) Bulls A jobber buys shares while prices are down and hold them in anticipation such t

I need a report on Specific Cost. Can you please assist me for Specific Cost report for about 2500 words?

what are the difference between receipt and payment account and income and expenditure account ?.

Sole Proprietorship Definition - A sole proprietorship or sole tradership is the oldest and simplest form of business. It is that type of business organization where one person

Why good judgement is important when making budgeting decisions