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FMBe & Ba

TThapa9y ago
DSP CO has an equity beta of 0.9 and asset beta of 0.4 and risk free rate is 4% and market premium is 11%. Calculate cost of equity? I couldnot understand calculating ke Ke=rf+(rm-rf)*Be. it has given Ba i tried calculating taking Be but answer mismatches.
John MoffatJohn MoffatTutor9y ago#1
Have you watched the free lectures? It is the equity beta that determines the cost of equity. The cost of equity = 4% + (0.9 x 11%) = 13.9% (Rm - Rf) is the market premium, which is given as being 11%.
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