16.

There are two companies, Tea Co. and Coffee Ltd., in which you are thinking about investing. You have collected the following information:

• Tea Co. is generating actual returns of 7%.
• Coffee Ltd. is generating actual returns of 8%.
• Tea Co. has a Beta of 0.79.
• Coffee Ltd. has a Beta of 1.30.
• The market's expected rate of return is 8%.
• The risk free rate of return is 2.50%.

Which company represents the better investment?

Select one:

a. Coffee Ltd. represents the better investment.

b. Tea Co. represents the better investment.

c. Both companies are equally good investments.

d. We would need information about dividends to judge correctly.