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kelley couriers just paid its annual dividend of $5.25 per share. the stock has a market price of $58.25 and a beta of 1.2. the return on the u.s. treasury bill is 1 percent and the market risk premium is 8.5 percent. what is the cost of equity? multiple choice 8.8% 10.0% 10.2% 8.5% 11.2%

Respuesta :

Use Capital Asset Pricing Model (CAPM) to find the cost of equity; the required rate of return by investors if they choose to buy kelley couriers stock.

CAPM ; r = risk free +Beta(Market risk premium)

risk free = 1% or 0.01 as a decimal

Beta = 1.2

Market risk premium = 8.5% or 0.085 as a decimal

CAPM ; r =0.112

r =  0.112

r = 0.112

CAPM rate of return is 11.2%

Therefore, kelley couriers cost of equity = 11.2%

To know more about CAPM visit here :

https://brainly.com/question/14029804

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