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ad-work [718]
3 years ago
11

The risk-free rate of return is 2% and the expected return on the market portfolio is 8%. Oklahoma Oilco has a beta of 2.0 and a

standard deviation of returns of 26%. Oilco's marginal tax rate is 35%. Analysts expect Oilco's net income to grow by 12% per year for the next 5 years. Using the capital asset pricing model, what is Oklahoma Oilco's cost of common stock
Business
1 answer:
solmaris [256]3 years ago
3 0

Answer:

The multiple choices are as follows:

18.6%

14.0%

22.8%

25.0%

The second option is the correct answer,14%

Explanation:

The capital asset pricing asset model formula for computing a firm's cost of equity according to Miller and Modgiliani is given below:

Ke=Rf+Beta*(Mr-Rf)

Rf is the risk free of 2% which is the return expected from zero risk investment such as government treasury bills.

Beta is how risky an investment in a company is compared to similar businesses operating in similar business sector of the company given as 2.0

Mr is the expected return on market portfolio which 8%

Ke=2%+2*(8%-2%)

Ke=2%+2*(6%)

Ke=2%+12%=14%

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What may happen if your job does not require you to use the aptitudes you possess?​
Viktor [21]

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<u>they will be underused and learning new interests may become necessary.</u>

<u>Explanation:</u>

Aptitudes usually refer to a person's inborn abilities or talents which include their mental and physical skills.

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3 years ago
The appropriate discount rate for the following cash flows is 8 percent compounded quarterly. YearCash Flow 1 $800 2 800 3 0 4 1
zalisa [80]

Answer:

Total PV= $2,298.24

Explanation:

<u>First, we need to determine the effective annual rate:</u>

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3 years ago
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