Register
Calculate the required rate of return for Avy Inc., assuming that the company has a beta of 1.10, while investors expect treasury bills to be yielding 3.0%, with a market risk premium is 5.0%.
56.2k views
4 votes
Calculate the required rate of return for Avy Inc., assuming that the company has a beta of 1.10, while investors expect treasury bills to be yielding 3.0%, with a market risk premium is 5.0%.

User Sourav Singh
by
3.4k points

1 Answer

5 votes

Answer:

8.5%

Step-by-step explanation:

Avy incorporation has a beta of 1.10

The risk free rate is 3.0%

The market risk premium is 5.0%

Therefore, the required rate of return can be calculated as follows

Required rate of return= Risk-free rate+beta(market Risk premium)

= 3.0% + 1.10(5.0%)

= 3.0%+5.5

= 8.5%

Hence the required rate of return is 8.5%

User Kuntady Nithesh
by
3.5k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

3.6m questions

4.5m answers

Other Questions

How can expansionary​ expenditure-based fiscal policy lead to crowding out in the​ economy? A. ​Expenditure-based fiscal policy increases the national​ debt, inducing​ forward-looking households and firms
Stevenson Company purchased equipment for $250,000 on January 1, 2010. The estimated salvage value is $50,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation.
Andrew doesn’t want to spend a lot of money on student loans, and does not qualify for grants. what is his best option for affording a bachelors degree
The method of appraisal in which the appraiser estimates the replacement cost of the building, deducts depreciation, and adds the value of the site is:________
The Yum and Yee food truck near the business school serves customers during lunch hour by taking orders and making fresh batches of stir-fry. Customers have only one choice during the lunch hour so that
Link Copied!