A Firm Has a Beta of 1

question 24

Multiple Choice

A firm has a beta of 1.2. The market return equals 14% and the risk- free rate of return equals 6 %. The estimated cost of ordinary equity is

• A) 6%
• B) 15.6%
• C) 14%
• D) 7.2%

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Definitions:

Exploration

The act of traveling in unknown regions to discover new knowledge, resources, or geographical routes.

Responsibility

Having the duty to deal with something or having control over someone, often tied to ethical or moral obligations.

Hardy Personality

Having the characteristics of a stress-resistant person–personal commitment, sense of control, positive attitude, balanced perspective, and caring relationships; having the adaptive capacity to deal effectively with stress and change.

Personal Commitment

An individual's dedication or pledge to fulfill an obligation, pursue a goal, or uphold a value.