Multiple Choice
Sun State Mining Inc., an all-equity firm, is considering the formation of a new division which will increase the assets of the firm by 50 percent.Sun State currently has a required rate of return of 18 percent, S.A.Treasury bonds yield 7 percent, and the market risk premium is 5 percent.If Sun State wants to reduce its required rate of return to 16 percent, what is the maximum beta coefficient the new division could have?
A) 2.2
B) 1.0
C) 1.8
D) 1.6
E) 2.0
Correct Answer:
Verified
Correct Answer:
Verified
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