Compute the cost of equity capital using the capm

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1. Consider Softmike, a software company. Softmike's world market beta is 1.75. Regressing Soft- mike's return on the world market return and the global HML factor gives betas of 1.50 and -1.2, respectively. Assume that the world equity pre- mium is 6%, the HML premium is 3%, and the risk-free rate is 5%. Compute the cost of equity capital using both the CAPM and the Fama-French model. Is Softmike a value company or a growth company?

2. Web Question: Estimate the cost of capital for a project that has the same risk as the cash flows earned by Google.

Reference no: EM13897680

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