The common stock of detroit engines has a beta of 1.34 and a standard deviation of 11.4 percent. the market rate of return is 11.5 percent and the risk-free rate is 4 percent. what is the firm's cost of equity?
a. 10.05 percent
b. 12.98 percent
c. 14.05 percent
d. 15.50 percent
e. 15.67 percent

The firm's cost of equity is C. 14.05 percent

Explanation:

Hi, we need to use the following formula in order to find the cost of equity of this firm.

Where:

r(e) = Cost of equity

rf = risk free rate

rm = Market rate of return

Everything should look like this.

So, this firm´s cost of equity is 14.05%

Best of luck

christopher columbus sail the ocean blue 1492

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