Data for Dana Industries Is Shown Below A) 1400%
B) 14

question 55

Multiple Choice

Data for Dana Industries is shown below. Now Dana acquires some risky assets that cause its beta to increase by 30%. In addition, expected inflation increases by 2.00%. What is the stock's new required rate of return? $$\begin{array} { l r r } \text { Initial beta } & 1.00 & \\\text { Initial required return } \left( \mathrm { r } _ { \mathrm { s } } \right) & & 10.20 \% \\\text { Market risk premium, } \mathrm { RP } _ { \mathrm { M } } && 6.00 \% \\\text { Percentage increase in beta } && 30.00 \% \\\text { Increase in inflation premium, IP } & &2.00 \%\end{array}$$

• A) 14.00%
• B) 14.70%
• C) 15.44%
• D) 16.21%
• E) 17.02%

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Definitions:

Constrained Resource

A limited resource within a manufacturing or production process that restricts the output volume.

Obsolete Inventory

Items in stock that are out of date or no longer in demand, which are unlikely to be sold.

Decision

The process or action of choosing among alternatives, often based on analysis and information to achieve a desired goal.

Overtime

Extra hours worked beyond the regular working schedule, often compensated at a higher pay rate.