Determine the cost of capital of a company by applying the CAPM
model that purchases government securities as per the prevailing rate
in the market. The prevailing rate of securities is 9.5%. The expected
return for the shares is 18%. The risk factor associated with the shares
is measured at the rate of 2.5%.
Answers
Answered by
0
Explanation:
In capital budgeting, corporate accountants and financial analysts often use the capital asset pricing model (CAPM) to estimate the cost of shareholder equity. Described as the relationship between systematic risk and expected return for assets, CAPM is widely used for the pricing of risky securities, generating expected returns for assets given the associated risk, and calculating costs of capital.
Similar questions