Gardner Electric Has a Beta of 0

question 79

Multiple Choice

Gardner Electric has a beta of 0.88 and an expected dividend growth rate of 4.00% per year.The T-bill rate is 4.00%, and the T-bond rate is 5.25%.The annual return on the stock market during the past 4 years was 10.25%.Investors expect the average annual future return on the market to be 12.50%.Using the SML, what is the firm's required rate of return?

• A) 11.34%
• B) 11.63%
• C) 11.92%
• D) 12.22%
• E) 12.52%

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Definitions:

Lacrimal

Pertaining to tears and the glands that produce tears, which play a crucial role in eye health and function.

Ethmoid

A spongy, cube-shaped bone between the eyes and at the roof of the nose, crucial for supporting the nasal cavity and forming part of the eye sockets.

Femur

The longest and strongest bone in the human body, also known as the thigh bone, it extends from the hip to the knee.

Fibula

The fibula is the slender and long bone located on the lateral side of the tibia in the lower leg, playing a key role in stabilizing the ankle and supporting muscles of the lower leg.