IKON Is Financed Entirely with Equity, and Its Beta Is

question 9

Multiple Choice

IKON is financed entirely with equity, and its beta is 1.31. If the current risk-free rate is 6.25% and the expected market return is 12.8%, what is IKON's required rate of return on a project of average risk?

• A) 8.58%
• B) 14.83%
• C) 17.65%
• D) 12.81%

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Definitions:

Government Failure

Situations where government interventions in the economy lead to inefficient outcomes, worsening the problem they intended to solve.

Efficient Allocation

The optimal distribution of resources among competing uses, aiming to maximize the overall benefit or utility from those resources.

Government Failure

A situation where government intervention in the economy causes inefficiencies or leads to an allocation of resources worse than the free market.

Competitive Markets

Markets where multiple sellers and buyers interact under the principles of supply and demand to determine prices and output without significant restrictions or monopolies.