H2W Technologies is considering raising capital to expand its offerings of 2-phase and 4-phase linear stepper motors. The beta value for its stock is high at 1.41. Use the capital asset pricing model and a 3.8% premium above the risk-free return to determine the cost of equity capital. The risk-free return is 3.2% per year.
What will be an ideal response?
Re = 0.032 + 1.41(0.038)
= 0.0856 (8.56%)
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