help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Apple Inc

Apple Inc

Economics

Apple Inc. (AAPL) has a current beta of 1.0. The market risk premium is 4 percent and the risk-free rate of return is 3 percent. By how much will the cost of equity change if Apple Inc. company expands their operations such that their company beta decreases to 0.85?

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Given,

Beta= 1

Market risk premium= 4%

Risk free rate of return= 3%

 

Cost of equity= 3%+ 1* (4%)

= 7.00%

 

Decreased Beta= 0.85

So,

Cost of equity= 3%+ 0.85* (4%)

= 6.40%

 

Decrease in cost of equity= 7%- 6.4%

= 0.60%

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)