The cost of equity capital for a company if the risk-free rate is 2 percent = 14.8%
Equity capital is the price range paid right into a business by buyers in alternate for not unusual or preferred inventory. This represents the center funding of a commercial enterprise, to which debt funding can be brought. Equity capitalis any capital raised thru promoting shares with a key distinction being whether the shares are offered privately or publicly: non-public: shares of inventory in an organization within a non-public group of traders.
Expected rate of return=Rf+β×(Rm−Rf)
Rf = Risk-free rate of return = 2%
Rm−Rf = Market risk premium = 9%
Putting the values,
Expected rate of return =4%+1.2×9%
=4%+10.8%
= 14.8%
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