A stock has a beta of 1.8. The pure rate of interest is 3.5 percent and investors require a 3 percent inflation premium. What is the required rate of return on this stock if the market risk premium is 6 percent? (Hint: First, calculate the risk-free rate using the pure rate and the inflation premium. Next, use this risk-free rate to find the required return on the stock.)

A. 15.7%

B. 16.5%

C. 17.4%

D. 13.7%

E. 14.8%

F. 12.9%

5 points

Question 10

1. Last year, Jen and Berry Inc. had sales of $45,000, cost of goods sold (COGS) of 12,000, depreciation charge of $3,000 and selling, general and administrative (SG&A) cost of $10,000. The interest costs were $2,500. Forty percent of SG&A costs are fixed costs. If its sales are expected to be $60,000 this year, what will be the estimated SG&A costs this year?
2. A. $12,000
3. B. $13,250
4. C. $14,250
5. D. $11,500
6. E. $12,667
7. F. $10,636