a. If the beta of Puritan stock equals 1.6, the risk-free rate equals 6%, and the expected return on the market portfolio equals 11% then what is its cost of equity.
b. Suppose that a 1% increase in expected inflation causes a 1% increase in the risk-free rate. Holding all other factors constant, what will this do to the firm’s cost of equity? Is it reasonable to hold all other factors constant? What other part of the calculation of the cost of equity is likely to change if expected inflation rises.
Recently Asked Questions
- Correcting a market with an externality through taxation is _________ correcting it through a set output target from command and control. more efficient than
- One of the keys to Google's success is that it encourages all of its ________ to innovate. A) engineers B) employees C) clients D) managers
- Explain Peck's analogy of life being like a map. How does Plato show that ignorance of our prejudices predisposes one to reject reality? Write a 2-4K (1-2