Porter Plumbing's Stock Had a Required Return of 11

question 99

Multiple Choice

Porter Plumbing's stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%.Then an increase in investor risk aversion caused the market risk premium to rise by 2%.The risk-free rate and the firm's beta remain unchanged.What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.)

• A) 14.38%
• B) 14.74%
• C) 15.11%
• D) 15.49%
• E) 15.87%

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Definitions:

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