The Common Stock of Silent Motors Has a Beta That

question 81

Multiple Choice

The common stock of Silent Motors has a beta that is 5 percent greater than the overall market beta.Currently, the market risk premium is 8.25 percent while the U.S.Treasury bill is yielding 2.8 percent.What is the cost of equity for this firm?

• A)11.66 percent
• B)10.86 percent
• C)11.81 percent
• D)11.46 percent
• E)10.75 percent

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Definitions:

Statement of Stockholders' Equity

A financial document that shows changes in the equity section of a company's balance sheet, including stock transactions and retained earnings.

Fiscal Year

A one-year period used for financial reporting and budgeting purposes, which doesn't necessarily align with the calendar year.

Condensed Income Statement

A simplified financial statement that shows a company's revenues, expenses, and net income over a specific period, omitting detailed line items.

Operating Expenses

Costs associated with the day-to-day functions of a business outside of direct production costs, including items like rent, utilities, and payroll expenses.