CCC Corp Has a Beta of 1

question 115

Multiple Choice

CCC Corp has a beta of 1.5 and is currently in equilibrium.The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%.Now the required return on an average stock increases by 37.5% (not percentage points) .Neither betas nor the risk-free rate change.What would CCC's new required return be? Do not round your intermediate calculations.

• A) 19.92%
• B) 17.10%
• C) 17.45%
• D) 17.63%
• E) 20.09%

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Definitions:

Extract

To remove or take out something by physical or chemical process, often used in reference to natural resources.

Interest Rates

The cost of borrowing money or the return on invested funds, typically expressed as a percentage of the principal amount per year.

User Cost

The cost associated with the use of a product or service, including purchase cost, maintenance, and operating expenses, as well as opportunity costs.

Extraction Cost

The expenses associated with the removal of raw materials or resources from their natural setting, which can include labor, equipment, and operational costs.