What is the company new required rate of return

Assignment Help Financial Management
Reference no: EM131597271

CAPM: req. rate of return Mathys Corporation's stock had a required return of 9.60% last year, when the risk-free rate was 3.00% and the market risk premium was 5.50%. Then an increase in investor risk aversion caused the market risk premium to rise by 1.50% from 5.50% to 7.00%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return?

a. 10.00%

b. 10.70%

c. 11.40%

d. 12.80%

e. 13.50%

Reference no: EM131597271

Questions Cloud

Annual equivalent cost of owning and operating the machine : Determine the annual capital cost (ownership cost) for the machine. What is the annual equivalent cost of owning & operating the machine?
Calculate the covariance between securities : Calculate the covariance between securities A & B based on the following information:
Value of the amazon company using the free-cash flow : Calculate the Value of the Amazon company using the Free-Cash Flow (FCF Model)
What is the expected return of a portfolio : What is the expected return of a portfolio that has invested $13200 in Stock A, $9400 in Stock B, and $14500 in Stock C?
What is the company new required rate of return : The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return?
What is a virtual private network : You work for JKS Accountants, which is a growing accounting firm in Sydney. The Managing Partner, Cindy, is looking to evolve the corporate network.
Portfolio be to achieve the desired required rate of return : What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return?
What is the company current stock price : What is the company's current stock price?
Considering an investment in two different bonds : You are considering an investment in two different bonds. One bond matures in seven years and has a face value of $1,000. What is the price of each bond?

Reviews

Write a Review

Financial Management Questions & Answers

  Health care benefits are excluded from taxation

Under current US law, employer-provided health care benefits are excluded from taxation. Use an indifference curve analysis to model the impact of eliminating the exclusion upon the amount of health care benefits. (Hint: Think of an individual as con..

  Standard deviation of the returns over this period

You’ve observed the following returns on Barnett Corporation’s stock over the past five years: –26.4 percent, 14.6 percent, 32.2 percent, 2.8 percent, and 21.8 percent. What was the arithmetic average return on the stock over this five-year period? W..

  Formulate a growth strategy

Most organizations have or need to formulate a growth strategy. What are the different ways to do so? Provide specific examples of companies that have utilized these different ways.

  What is current bond price-bonds make semiannual payments

Sqeekers Co. issued 12-year bonds a year ago at a coupon rate of 8.4 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6.7 percent, what is the current bond price?

  What is the rate of return on equity investment for buyer

What is the rate of return on the equity investment for a buyer who pays cash to purchase this investment property?

  Sensitivity to ocf to changes in the variable cost figure

We are evaluating a project that costs $848,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Calculate the base cash flow and NPV? What is the Sensitivity to NPV to..

  Total interest amount you will pay over the life of the loan

Loan Amortization Problem Type your full name in the following order First Middle Last Number of letters in full name = Now assume that your annual salary = number of letters in your full name x $45,000 and that the bank you want to borrow from. Calc..

  What is the total cash flow for firm

What is the total cash flow for Firm A. What is the plowback ratio in the previous question?

  Find the sinking fund deposit

Find the sinking fund deposit.

  What is the value of savings bond at the end of year five

Future value-Grand Opening Bank is offering a one-time investment opportunity for its new customers. What is the value of the savings bond at end of year five

  Find the value of the investment at the end of five years

find the value of the investment at the end of 5 years for the following compounding methods.

  Dividend policy function

How would you describe your chosen company's dividend policy? Why do you believe this company chose the dividend policy they have in place? Do you agree or disagree that they have selected the best dividend policy for the company? How might this divi..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd