Mikkelson Corporation's Stock Had a Required Return of 12

question 55

Multiple Choice

Mikkelson Corporation's stock had a required return of 12.50% last year,when the risk-free rate was 3% 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. ) Do not round your intermediate calculations.

• A) 12.87%
• B) 16.50%
• C) 13.04%
• D) 12.71%
• E) 14.36%

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Definitions:

External Environments

All elements outside of an organization that can affect its performance and strategy, including economic, technological, socio-cultural, and legal factors.

Mechanistic Structures

Organizational frameworks characterized by rigorous procedures, clear hierarchies, and distinct roles, aiming for efficiency and predictability.

Organic Structures

Flexible and adaptive organizational structures that foster innovation, creativity, and responsiveness, emphasizing informal networks and decentralized decision-making.

Departmentalization

The method of dividing an organization into distinct departments, allowing for specialized functional areas that focus on specific tasks or duties.