A Firm Has a Beta of 1

question 29

Multiple Choice

A firm has a beta of 1.2. The market return equals 14 percent and the risk-free rate of return equals 6 percent. The estimated cost of common stock equity is ________.

• A) 6 percent
• B) 7.2 percent
• C) 14 percent
• D) 15.6 percent

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Definitions:

Row Variable

A row variable in statistical or data analysis refers to a variable that is presented horizontally in a table or dataset, representing different categories or groups for analysis.

Column Variable

A variable whose values are laid out in columns in a table or dataset, facilitating vertical comparison across data points.

Alpha

In statistics, alpha often denotes the level of significance, a threshold below which the null hypothesis is rejected.

Chi-Square

A statistical test used to determine if a significant relationship exists between two categorical variables in a contingency table.