(Part 1) An analyst has collected the following information:

• The risk-free rate is 5.5 percent.
• The market risk premium is 5 percent.
• The stocks beta is 1.4.

What is the companys cost of equity?

1. 7.7%
2. 12.5%
3. 15.3%
4. 17.1%

(Part 2)The estimated beta for RDG is 0.74. The risk free rate of return is 4 percent and the Equity Risk Rremium is 5 percent. What is the required rate of return for RDG using the CAPM?

5. 15.2%
6. 12.3%
7. 10.1%
8. 7.7%

(Part 3)MDX has a current beta of 1.6. The market risk premium is 7 percent and the risk-free rate of return is 3 percent. By how much will the cost of equity increase if the company expands their operations such that their company beta rises to 1.9?

1. 2.1%
2. 3.4%
3. 4.5%
4. 5.6%