Engler Equipment Has a Beta of 0

question 51

Multiple Choice

Engler Equipment 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:

Anticodons

Sequences of three nucleotides in a transfer RNA molecule that are complementary to a specific codon in messenger RNA.

Codons

Sequences of three nucleotides in mRNA that specify a particular amino acid or a start/stop signal during protein synthesis.

Eukaryotic Cells

Complex cells with a nucleus and other organelles enclosed within membranes.

Cytoplasm

Region of a cell between the nucleus, or the nucleoid region of a bacterium, and the plasma membrane; contains the organelles of the cell.