A COMPANY THAT WANTS TO DETERMINE ITS COST OF EQUITY GATHERS THE F...

22. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014
MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014

22.

A company that wants to determine its cost of equity gathers the following information Rate of return on 3-month Treasury bills 3.0% Rate of return on 10-year Treasury bonds 3.5% Market risk premium 6.0% The company’s equity beta 1.6 Dividend growth rate 8.0% Corporate tax rate 35% Using the capital asset pricing model (CAPM) approach, the cost of equity (%) for the company is closest to: A. 13.1%. B. 12.6%. C. 7.5%.