CCC Corp Has a Beta of 1

question 22

Multiple Choice

CCC Corp has a beta of 1.5 and is currently in equilibrium.The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%.Now the required return on an average stock increases by 30.0% (not percentage points) .Neither betas nor the risk-free rate change.What would CCC's new required return be?

• A)14.89%
• B)15.68%
• C)16.50%
• D)17.33%
• E)18.19%

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Definitions:

Administered Cooperative System

A cooperative arrangement where operations and activities are managed and directed by a centralized authority, often to achieve economies of scale or shared goals.

Franchising

A business model where a franchisor licenses its trade name and operating methods to a franchisee in exchange for a fee and ongoing royalties.

Contractual Arrangement

An agreement between parties that is enforced by law, specifying the duties and rights of each party.

Parent Company

A corporation that owns enough voting stock in another company to control management and operations by influencing or electing its board of directors.