Cost of Equity

CFA Level I
#1

Determine the cost of equity that can be used in the calculation of the weighted average cost of capital. Rate of return on 3-month Treasury bills 3.0% Rate of return on 10-year Treasury bonds 3.5% Market equity risk premium 6.0% Sorbonne’s estimated beta 1.6 Which rate do you use to calc Ke using CAPM and why?

#2

This has been discussed before and it depends on the question; however, the 10-year T-Bond is more acceptable, especially if it’s a long-term project…

#3

Would you be able to direct me to the specific thread?

#4

Here you go mambovipi: http://www.analystforum.com/phorums/read.php?11,737774,737776#msg-737776