RKKL Is Considering Buying a Company That Has No Leverage

question 48

Multiple Choice

RKKL is considering buying a company that has no leverage but an asset beta of.7. The market risk premium is 6% and the risk-free rate is 2%. If they plan to use 75% debt, what will the required rate of return be?

• A) 18.8%
• B) 6.2%
• C) 8%
• D) 14.6%

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Definitions:

Forecast Accuracy

A measure of how close the forecasted values are to the actual values, often used in evaluating the performance of forecasting models.

Sum of Squares

A statistical measure that quantifies the variation within a dataset, calculated by summing the squares of each deviation from the mean.

Accuracy

The degree to which the result of a measurement, calculation, or specification conforms to the correct value or a standard.

Forecast Accuracy

The degree to which a forecast predicts actual outcomes.