A Company Has a Beta of 3

question 18

Multiple Choice

A company has a beta of 3.25. If the market return is expected to be 14 percent and the risk-free rate is 5.5 percent, what is the company's required return?

• A) 22.750 percent
• B) 33.125 percent
• C) 45.500 percent
• D) 51.000 percent

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Definitions:

Average Variable Costs

The per unit cost of production that varies with the level of output, including elements like labor and raw materials.

Average Costs

Average costs represent the total costs of production divided by the total output or the cost per unit of output, often used to assess the efficiency of production processes.

Shutting-Down

The process of ceasing operations or activities, often temporarily or permanently, for businesses or projects.

Long-Run

A period where all inputs or factors of production can be varied by firms, allowing them to adjust all aspects of their operations.