Porter Plumbing's Stock Had a Required Return of 11

question 12

Multiple Choice

Porter Plumbing'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%

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Definitions:

Retirement Savings

Funds accumulated for retirement, often involving tax advantages, through vehicles such as 401(k) plans, IRAs, or annuities.

AGI

Adjusted Gross Income, an individual's total gross income minus specific deductions, used in the United States tax system to determine taxable income.

Dependent Daughters

This term is not an official tax term but generally refers to daughters who qualify as dependents on someone's tax return due to financial support and other IRS criteria.

AGI

Adjusted Gross Income, which is gross income minus allowable deductions, used to determine taxable income on an individual's federal income tax return.