The Delta Co

question 49

Multiple Choice

The Delta Co.owns retail stores that market home building supplies.Largo,Inc.builds single family homes in residential developments.Delta has a beta of 1.22 and Largo has a beta of 1.34.The risk-free rate of return is 4 percent and the market risk premium is 6.5 percent.What should Delta use as their cost of equity if they decide to purchase some land and create a new residential community?

• A) 11.93 percent
• B) 12.32 percent
• C) 12.43 percent
• D) 12.57 percent
• E) 12.71 percent

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Definitions:

Demand For Z

The desire for a specific product or service, labeled 'Z', within a market that consumers are willing and able to purchase at a given price.

Excise Tax

A tax applied to specific goods, services, or activities, often to discourage their use or to raise government revenue.

Price Of Cigarettes

The cost that consumers pay to purchase cigarettes, which can vary widely based on taxes, manufacturing costs, and availability.

Supply Curve

A graph showing the relationship between the price of a good and the quantity of the good that suppliers are willing and able to produce at that price.