Seattle Pacific University

The Treasury rate plus beta times market risk is the “i” or cost of equity (Ke) in the PV model above when the firm is financed entirely by common stock. If the risk free rate is 5.5%, the average return on S&P stocks is 11.5%, and the company’s beta is 1.2, the “i” or Ke would be 5.5% + 1.2 * (11.5% - 5.5… ................
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