Westsyde Tool Company Is Expected to Pay a Dividend of $1.50

question 90

Multiple Choice

Westsyde Tool Company is expected to pay a dividend of $1.50 in the upcoming year. The risk-free rate of return is 6%, and the expected return on the market portfolio is 14%. Analysts expect the price of Westsyde Tool Company shares to be $29 a year from now. The beta of Westsyde Tool Company's stock is 1.2. Using the CAPM, an appropriate required return on Westsyde Tool Company's stock is ________.

• A) 8%
• B) 10.8%
• C) 15.6%
• D) 16.8%

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Definitions:

Fast Food Chain

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Contractual Business Arrangement

A legally binding agreement between two or more parties outlining the terms and conditions of a business relationship.

Pledge Funds

Investment funds where investors commit capital to be called upon by the fund managers as investment opportunities arise, typically used in real estate and private equity.

Limit Expenditure

Strategies or practices aimed at restricting the amount of money spent on specific goods, services, or activities.