An automobile company is contemplating issuing stock to finance an investment in producing a new
sports-utility vehicle. The annual return to the market portfolio is expected to be 15%, and the current risk-free
interest rate is 5%. The company's analysts further believe that the expected return to the project will be 20%
annually. What is the maximum beta value that would induce the auto maker to issue the stock?

Question

Quizplus · Accepted Answer

The Answer is <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB3237/11eb3d44_2d75_13cf_86f9_abb7f24ffd0d_TB3237_00.jpg" alt=" " class="answers-bank-image d-block" rel="preload" >

An Automobile Company Is Contemplating Issuing Stock to Finance an Investment