Question

Asset P has a beta of 1.6. The risk-free rate of return is 4 percent, while the market risk premium is 10. The asset's required rate of return is ________. Select one: a. 10.0 percent b. 25.0 percent c. 15.0 percent d. 20.0 percent Miller Dental, Inc. is considering replacing its existing laser checking system, which was purchased 3 years ago at a cost of $400,000. The laser checking system can be sold for a lump sum of $200,000. It is being depreciated using MACRS and a 5-year recovery period. A new laser checking system will cost $600,000 to purchase and install. Replacement of the planned laser checking system would not involve any change in net working capital. Assuming a 20% tax rate, calculate the initial investment: Select one: a. 466,800 b. 416,800 c. 566,800 d. 516,800

A(n) ________ in the beta coefficient normally causes ________ in the required return and therefore ________ in the price of the stock, everything else remaining the same.

Select one:

a. decrease; a decrease; an increase

b. decrease; an decrease; an decrease

c. increase; a decrease; an increase

d. increase; an increase; an increase

Answer 1