Final answer:
Yonan Corporation's new required return cannot be calculated exactly without knowing the company's beta. However, using the CAPM formula, it is clear that the required return will increase by (beta × 2%) due to the 2% increase in the market risk premium, which is now 6.75%.
Step-by-step explanation:
The question asks for Yonan Corporation's new required return given an increase in the market risk premium while the company's beta and the risk-free rate remain unchanged. The original required return of 11.5% was calculated using the Capital Asset Pricing Model (CAPM), which is expressed as: required return = risk-free rate + (beta × market risk premium). With the risk-free rate at 5.5% and market risk premium originally at 4.75%, if the market risk premium increases by 2%, it becomes 6.75% (4.75% + 2%). To find Yonan's new required return, we simply substitute the new market risk premium into the CAPM formula to get: new required return = 5.5% + (beta × 6.75%). Without knowing Yonan's exact beta, we cannot numerically calculate the new required return, but we can say that the required return will increase by (beta × 2%). This means that the new required return will indeed be higher than the initial 11.5% due to the increase in market risk premium.