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Calculate Radeks cost of equity capital

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Question - The following data pertains to Radek Corp., a manufacturer of office supplies (dollar amounts in thousands). Use this information to complete questions.

Total assets $8,731

Interest-bearing debt $4,239

Average borrowing rate for debt 10.0%

Common equity:

Book value $3,130

Market value $16,284

Marginal income tax rate 35%

Market equity beta 1.33

Using the information in the table and assuming that the risk-free rate is 5.3% and the market risk premium is 7.3% calculate Radek's cost of equity capital, using the capital asset pricing model.

a. 15.01%

b. 14.35%

c. 9.71%

d. 7.05%

Reference no: EM132515295

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