Determine the cost of common equity

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Reference no: EM131304004

As a senior corporate financial analyst you were approached by the Matthew Corp.’s CFO and asked to determine the cost of common equity. You read about the Nobel prize-winning mean variance capital asset pricing model and decided to give it a try. You found the beta for Marshall is 1.60, the rate of return on long term US government bonds to be 3%, the return on short term government bonds is 2.5%, and the market risk premium over the past 70 years has averaged 5%. Using this data, what is Matthew’s cost of equity? (round at 2 decimal places)

Reference no: EM131304004

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