Determine the cost of common equity

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Reference no: EM131898911

When the CEO of Westmont Electronic Company wants to determine the cost of common equity, she uses both the capital asset pricing model and the dividend valuation model. Assume:

Rf= 8%

Km= 13%

?= 1.7%

D1= $0.90

P0= $20

g= 9%

1. Compute K_i (required rate of return on common equity based on the capital asset pricing model). Answer as a percent rounded to 2 decimal places.

2. Compute K_e (required rate of return on common equity based on the dividend valuation model). Answer as a percent rounded to 2 decimal places.

Reference no: EM131898911

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