Part C-

The risk-free rate is 5%, the market risk premium is 8%, and the market return is 13%. Stock Y's beta is 1.85 and the standard deviation of its returns is 62.5%. What should be the stock's expected rate of return to make the investor indifferent toward buying or selling the stock?

11.66

12.50

15.54

19.80

Super Solutions Inc. is a constant growth firm, which just paid a dividend of $3.00, sells for $33.00 per share, and has a growth rate of 6 percent. Which of the following is the cost of retained earnings using the discounted cash flow (DCF) approach? (Round off the answer to two decimal places.)

12.40 percent

16.25 percent

15.64 percent

13.35 percent

Assume that a 15-year, $1,000 face value bond pays interest of $37.50 every 3 months. If an investor requires a simple annual rate of return of 12 percent with quarterly compounding, how much should the investor be willing to pay for this bond? (Round the answer to two decimal places.)

$1,120.71

$986.43

$1,358.24

$1,207.57

is the median value of the probability distribution of possible returns

equals the required rate of return for the investment

is the mean value of the probability distribution of possible returns

equals the required rate of return for the investment

Which of the following is a capital component for the purpose of calculating the weighted average cost of capital in capital budgeting?

The after-tax cost of long-term debt

The after-tax cost of preferred stock

The after-tax cost of new equity