Mikkelson Corporation's Stock Had a Required Return of 11

question 133

Multiple Choice

Mikkelson Corporation's stock had a required return of 11.75% last year,when the risk-free rate was 5.50% and the market risk premium was 4.75%.Then an increase in investor risk aversion caused the market risk premium to rise by 2%.The risk-free rate and the firm's beta remain unchanged.What is the company's new required rate of return? (Hint: First calculate the beta,then find the required return.)

• A)14.38%
• B)14.74%
• C)15.11%
• D)15.49%
• E)15.87%

Identify the impact of interest rates on investment decisions.

Calculate the present value of cash flows from an investment.

Use the rule of 72 to estimate the doubling time for an investment.

Evaluate investment decisions under different capital cost conditions.

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Definitions:

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