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Assume that neither betas nor the risk-free rate change

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The common stock of Baxter Paint has a beta of 1.5 and is currently in equilibrium. The required rate of return on this stock is 12.00% versus a required return on an average-risk stock of 10.00%. Now assume the required return on an average stock increases by 30.0% (this means that the required return on an average risk stock is 30% greater than its original value, not an absolute increase of 30 percentage points above its original value). Assume that neither betas nor the risk-free rate change. After the changes described above, what would be the new required return on Baxter Paint's common stock?

Reference no: EM13570847

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