Oak Enterprises Has a Beta of 1

question 8

Multiple Choice

Oak Enterprises has a beta of 1.2, the market return is 8%, and the T-bill rate is 4%. Its tax rate is 40%. What is its expected required return of common equity?

• A) 11.45%
• B) 8.80%
• C) 5.28%
• D) 7.43%

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Definitions:

Galveston

A coastal city in Texas, known for its significant role in Texas history and as a major tourist destination.

Gilded Age

A period in U.S. history from the 1870s to about 1900, marked by rapid industrialization, economic growth, and ostentatious displays of wealth among the upper class.

Hurricane

A hurricane is a powerful tropical cyclone with sustained winds of at least 74 miles per hour, characterized by heavy rains and potentially catastrophic damage, mostly occurring in the Atlantic Ocean and the northeastern Pacific Ocean.

Exodusters

African Americans who migrated from the Southern United States to Kansas in the late 19th century to escape racial oppression and seek better opportunities.