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Question
The following financial information is available on Rawls Manufacturing Company:| Current per share market price | $48.00 |
| Beta | 1.1 |
| Expected rate of return on market | 12.0% |
| Risk-free rate | 6.0% |
Rawls can issue new common stock to net the company $44 per share. Determine the cost of internal equity capital using the capital asset pricing model approach. (Compute answer to the nearest 0.1%).
a. 12.9%
b. 12.6%
c. 13.0%
d. 4.4%
Answer
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