Demonstrate what is the required rate of return on B stock

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Question 1: Porter Plumbing's stock had a required return of 11.00% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return?

Question 2: Stock A's stock has a beta of 1.30, and its required return is 11.50%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock?

Question 3: Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 12.00%, and the risk-free rate is 4.30%. What is the required rate of return on the market?

Question 4: Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 25%, what is the component cost of debt for use in the WACC calculation?

Reference no: EM132599439

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