Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year.Dividends are expected to grow at the rate of 6% per year.The risk-free rate of return is 5%, and the expected return on the market portfolio is 13%.The stock of Torque Corporation has a beta of 1.2. What is the return you should require on Torque's stock?

Question

Quizplus · Accepted Answer

To find the required return, we can use the Capital Asset Pricing Model (CAPM):
Required return = risk-free rate + beta * (market return - risk-free rate)
= 5% + 1.2 * (13% - 5%)
= 5% + 1.2 * 8%
= 5% + 9.6%
= 14.6%
Therefore, the answer is B) 14.6%.

Torque Corporation Is Expected to Pay a Dividend of $1