NewLinePhone Corp

question 108

Short Answer

NewLinePhone Corp.is very risky,with a beta equal to 2.8 and a standard deviation of returns of 32%.The risk-free rate of return is 3% and the market risk premium is 8%.NewLinePhone's marginal tax rate is 35%.Use the capital asset pricing model to estimate NewLinePhone's cost of retained earnings.

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Definitions:

Grandfather Clauses

Legislative measures that allowed those who could vote before the Civil War, and their descendants, to bypass literacy tests and other obstacles to voting, effectively disenfranchising many African Americans.

Democratic Party

One of the two major contemporary political parties in the United States, traditionally associated with progressive and liberal policies.

Fifteenth Amendment

An amendment to the United States Constitution, ratified in 1870, that prohibits the federal government and each state from denying a citizen the right to vote based on that citizen's "race, color, or previous condition of servitude."

Democratic State Primaries

A process by which the Democratic Party in the United States selects its candidates for various elected positions in government.