Alpha Inc'S Beta Is 1

question 16

Multiple Choice

Alpha Inc.'s beta is 1.2, the risk-free rate is 10 percent, and the market risk premium is 5 percent. Which of the following is Alpha's cost of retained earnings using the capital asset pricing model (CAPM) approach?

• A) 8 percent
• B) 10 percent
• C) 12 percent
• D) 14 percent
• E) 16 percent

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Definitions:

Local Monopoly

A situation where a single company or entity exclusively supplies a product or service in a specific geographic area, facing no competition.

CEO Pay

The compensation awarded to the Chief Executive Officer of a company, which may include salary, bonuses, shares, and other benefits.

Ratio

A quantitative relationship between two numbers showing how many times the first number contains the second.

Japan

An island country located in East Asia, known for its rich cultural heritage, advanced technology, and economic influence.