how is the answer 10%????can somebody explain the formula used here??

Feb 13 2014 12:31 PM

Cost of equity= Risk free rate + Beta*(market return-risk free rate)

where,

Beta*(market return-risk free rate)= excess market premium

Therefore,

Excess market premium= cost of equity- risk free rate

= 25%-15%

= 10%

Mar 12 2014 07:56 PM
where,

Beta*(market return-risk free rate)= excess market premium

Therefore,

Excess market premium= cost of equity- risk free rate

= 25%-15%

= 10%