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:

Bureaucracy

An organizational style characterized by formalized rules and regulation, specialized routine tasks, division of labor, and centralized authority.

Specialization

The process of focusing on a narrow area of expertise to become more efficient and productive in that area.

Bored Employees

Refers to workers who experience a lack of interest, enthusiasm, or engagement in their job tasks.

Negotiation

The process of reaching an agreement that both parties find acceptable.