07
Jan

# Risk free rate is 3%. Equity risk premium is 5%

*Question***: Risk free rate is 3%. Equity risk premium is 5%.**

*Question*

- Risk free rate is 3%. Equity risk premium is 5%. Beta is 2. Using the Capital Asset Pricing Model, compute the cost of equity capital.
- Earnings before Interest and Taxes is 200. Depreciation is 50. Capital Expenditure is 55. Net additions to Working Capital is 20. Taxes are 25. Compute Cash Flow From Assets (CFFA).
- If Net Present Value (NPV) is greater than Zero, you:
- Accept the project.
- Reject the project.
- Flip a coin. d. Sleep on it.

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