Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help me with both thank you!! Mikkelson Corporation's stock had a required return of 4.85% last year, when the risk-free rate was 2% and

image text in transcribedimage text in transcribedplease help me with both thank you!!

Mikkelson Corporation's stock had a required return of 4.85% last year, when the risk-free rate was 2% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2 percentage points. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.) Do not round your intermediate calculations. O a. 6.85% O b. 4.85% O C. 4.05% O d. 8.7596 O e. 6.05% Data for Dana Industries is shown below. Now Dana acquires some risky assets that cause its beta to increase by 30.0%. In addition, expected inflation increases by 1.50 percentage points. What is the stock's new required rate of return? Do not round your intermediate calculations. 1.00 9.40% 6.00% Initial beta Initial required return (rs) Market risk premium, RPM Percentage increase in beta Increase in inflation premium, IP O a. 11.929 30.00% 1.50% O b. 12.70% O C. 13.1596 O d. 11.20% O e. 10.90%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Multinational Finance

Authors: Kirt Butler

2nd Edition

0324004508, 978-0324004502

More Books

Students also viewed these Finance questions

Question

19. How has the Web affected the components of DSS and vice versa?

Answered: 1 week ago