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e-lub [12.9K]
3 years ago
8

If the firm’s beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm’s cost o

f common equity using the CAPM approach? c. If the firm’s bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations.
Business
1 answer:
Luden [163]3 years ago
3 0

Answer:

CAPM= RF+B(RM-RF)

= 9+1.6(13-9)

=15.4%

13=RS+1.6*(4)

13=RS+6.4

RS=13-6.4

RS=6.6%

Explanation:

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They should not be able to successfully negotiate the terms of this loan within these parameters.

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