Question
8. What is the CAPM required return of a stock with a beta of 1.7 if the risk-free rate is 1.7% and the expected market
8. What is the CAPM required return of a stock with a beta of 1.7 if the risk-free rate is 1.7% and the expected market risk premium is 5.1%? Answer in percent, rounded to two decimal places. (e.g., 4.32% = 4.32). [Hint: CAPM required return = Risk-free rate + beta x EMRP. Mind your order of operations!]
9. What is the CAPM required return of a stock with a beta of 1.2 if the risk-free rate is 0.9% and the expected market return is 5.6%? Answer in percent, rounded to two decimal places. (e.g., 4.32% = 4.32). [Hint: CAPM required return = Risk-free rate + beta x [expected market return - risk-free rate). Mind your order of operations!]
10. A company has a beta of 1.2, pre-tax cost of debt of 6.1% and an effective corporate tax rate of 24%. 47% of its capital structure is debt and the rest is equity. The current risk-free rate is 0.5% and the expected market risk premium is 6.1%. What is this company's weighted average cost of capital? Answer in percent, rounded to two decimal places.
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