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Retained earnings don't pay interest or dividends, but investors still expect to earn a return on the earnings that the firm reinvests on their behalf.
Retained earnings don't pay interest or dividends, but investors still expect to earn a return on the earnings that the firm reinvests on their behalf. Use the following information to estimate an investors required rate of return.
Risk free rate = | 3.00% | Beta = | 1.050 |
Market rate = | 11.00% | Todays price = | $20.00 |
Growth = | 6.00% | Anticipated dividend = | $1.50 |
Borrowing rate = | 7.50% | Tax rate = | 25.00% |
Select one:
a.
11.40%
b.
11.15%
c.
11.55%
d.
14.55%
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