The Common Stock of Serenity Homescapes Has a Beta of 1.21

question 71

Multiple Choice

The common stock of Serenity Homescapes has a beta of 1.21 and a standard deviation of 17.8 percent.The market rate of return is 13.5 percent and the risk-free rate is 3.2 percent.What is the cost of equity for this firm?

• A)15.66 percent
• B)13.61 percent
• C)13.93 percent
• D)16.25 percent
• E)14.90 percent

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Definitions:

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale.

Location Decision

The process of selecting a geographical site for a company's operations, facilities, or services.

Capital Flow

The movement of money for the purpose of investment, trade, or business production internationally or within a country.

Memphis

A city located in the southwestern part of Tennessee, USA, known for its rich cultural history, especially in music, and as the home of Elvis Presley's Graceland.