Exhibit 14 -Refer to Exhibit 14

question 123

Multiple Choice

Exhibit 14.11
Use the Information Below for the Following Problem(S)
$\begin{array}{lcc}\text { Investment } & \text { Beta } & \text { Analyst's Estimated Return } \\\hline \text { Stock } \mathrm{X} & 2.3 & 15.5 \% \\\text { Stock } \mathrm{Y} & 1.2 & 13.6 \% \\\text { Market Portfolio } & 1.0 & 11.5 \%\end{array}$

-Refer to Exhibit 14.11.What is the required rate of return for Stock Y based on the capital asset pricing model (CAPM) ?

• A) 11.5%
• B) 13.0%
• C) 13.6%
• D) 14.8%
• E) 15.5%

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Definitions:

Acquisition Differential

The difference between the cost of acquiring a company and the fair value of its identifiable net assets.

Equity Method

An accounting technique used to record the investments in other companies, where the investment is significant but the investor does not have full control.

Patent

A legal right granted to an inventor for an exclusive period, typically 20 years, to exploit a new, useful, and non-obvious invention.

Consolidated Cash Flows

A statement merging the cash flows of a parent company and its subsidiaries to present the overall cash generated or used by the entire group.