Understanding Cost of Equity

In corporate finance, unders\tanding the \cost of equity is crucial for evaluating investment opportunities. The \cost of equity represents the return that equity investors expect on their investment in a company. Various models can be used to estimate the \cost of equity, one of which is the Capital Asset Pricing Model (CAPM).

The CAPM formula is given by:

Cost of Equity = Risk-Free Rate + Beta x (Market Return - Risk-Free Rate)

Given the above information, which of the following statements most accurately reflects the characteristics of the \cost of equity?