Redesign Corp

question 51

Essay

Redesign Corp.is considering a new strategy that would increase its expected return from 12% to 13.9%,but would also increase its beta from 1.2 to 1.8.If the risk-free rate is 5% and the return on the market is expected to be 10%,should Redesign change its strategy?

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Definitions:

Productivity

The effectiveness in producing outcomes or results; can refer to the rate at which work is completed or the efficiency of resource use.

Output

The total amount of goods or services produced by a firm, industry, or economy within a specific period.

MRP Schedule

A document or plan that outlines the marginal revenue product of an input, showing how changes in quantity of the input affect revenue generated.

Perfect Competitor

An individual or company that cannot influence the market price because the market is saturated with similar products, acting within a perfectly competitive market.