The Wrench Company Is Expected to Pay a Dividend of $1.00

question 110

Multiple Choice

The Wrench Company is expected to pay a dividend of $1.00 in the upcoming year. Dividends are expected to grow at the rate of 6% per year. The risk-free rate of return is 5%, and the expected return on the market portfolio is 13%. The stock of the Wrench Company has a beta of 1.2. What is the return you should require on The Wrench's stock?

• A) 12.0%
• B) 14.6%
• C) 15.6%
• D) 20%
• E) None of the options are correct.

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