What is its expected required return of common equity

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Reference no: EM131609015

1. A firm has $50 million in assets and its optimal capital structure is 60% equity. If the firm has $12 million in retained earnings available to invest, at what asset level will the firm need to issue additional stock? (Assume no growth in retained earnings.)

The firm should have already issued additional stock.

The firm can increase assets by $30 million.

The firm can increase assets by $20 million.

There is insufficient information to determine an answer.

2. Oak Enterprises has a beta of 1.2, the market return is 8%, and the T-bill rate is 4%. Its tax rate is 40%. What is its expected required return of common equity?

Between 11% and 12%

Between 8% and 9%

Between 7% and 8%

Between 5% and 6%

Reference no: EM131609015

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