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Leona [35]
3 years ago
8

Steady Company’s stock has a beta of 0.20. If the risk-free rate is 6% and the market risk premium is 7%, what is an estimate of

Steady Company’s cost of equity?
Business
1 answer:
777dan777 [17]3 years ago
5 0

Answer:

the estimation of the cost of equity is 7.4%

Explanation:

The computation of the estimation of the cost of equity is shown below:

Here we used the Capital Asset Pricing model formula i.e.

Cost of equity = Risk free rate + Beta × market risk premium

= 6% + 0.20 × 7%

= 6% + 1.4%

= 7.4%

Hence, the estimation of the cost of equity is 7.4%

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

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ser-zykov [4K]

Answer:

32.03%

Explanation:

Data provided as per the question

Net operating income = $42,930

Average operating assets = $134,000

The computation of  return on investment (ROI) is shown below:-

Return on investment =net operating income ÷ average operating assets

$42,930 ÷ $134,000

= 32.03%

Therefore for computing the return on investment we simply divide average operating assets by net operating income.

5 0
3 years ago
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