Select the correct statement from the following,assuming Carmichael Company had a favorable direct materials price variance of $
1 answer:
You might be interested in
Answer:
Ans. The cost of equity capital is 6.5 (6.5%)
Explanation:
Hi, all we need to do is fill the following equation with the data from the problem.
Where:
rf = Risk free rate (in our case, 2%)
MRP = market risk premium (in our case, 6%)
r(e) = Cost of equity capital
Therefore, this is what we get.
So the cost of equity capital is 6.5% or 6.5 as the problem suggests to answer.
Best of luck.