The management of Quills and Ink want to calculate the required rate of return (ROR) of the company. The following information is available: Risk free rate 5.30%
Equity risk premium 4.24%
Firm size premium 2.16%
Industry risk premium 6.50%
Specific company risk premium 3.00%
Calculate the ROR of Quills and Ink.
A) 16.96%
B) 21.20%
C) 18.20%
D) 19.40%

Question

Quizplus · Accepted Answer

The required rate of return (ROR) is calculated by summing up all the given premiums and the risk-free rate: 5.30% (risk-free rate) + 4.24% (equity risk premium) + 2.16% (firm size premium) + 6.50% (industry risk premium) + 3.00% (specific company risk premium) = 21.20%.

The Management of Quills and Ink Want to Calculate the Required