Question
Data for Dana Industries is shown below. Now Dana acquires some risky assets that cause its beta to increase by 30%. In addition, expected inflation
Data for Dana Industries is shown below. Now Dana acquires some risky assets that cause its beta to increase by 30%. In addition, expected inflation increases by 2.00%. What is the stock's new required rate of return?
| Initial beta | 1.00 |
| Initial required return (rs) | 10.20% |
| Market risk premium, RPM | 6.00% |
| Percentage increase in beta | 30.00% |
| Increase in inflation premium, IP | 2.00% |
| 1. | 14.00% | |
| 2. | 14.70% | |
| 3. | 15.44% | |
| 4. | 16.21% | |
| 5. | 17.02% |
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Fundamentals Of Financial Management
Authors: James C. Van Horne
10th Edition
0138596875, 978-0138596873
