Determine the cost of equity

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Reference no: EM132912130

Question - An analyst has gathered the following information on a company and the market:

Current market price of company's common shares $10.20

Common stock dividend yield, based on most recent dividend paid 2.45 percent

Expected dividend payout rate 20 percent

Expected return on equity (ROE) 15 percent

Beta for company's common stock 1.4

Asset beta for company's industry 0.9

Expected rate of return for the market portfolio 10 percent

Risk-free rate of return 4 percent

Using the capital asset pricing model (CAPM) approach, determine the cost of equity?

Reference no: EM132912130

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