Midwest Airline is expected to pay a dividend of $7 in the coming year. Dividends are expected to grow at the rate of 15% per year. The risk-free rate of return is 6%, and the expected return on the market portfolio is 14%. The stock of Midwest Airline has a beta of 3.00. The return you should require on the stock is
A) 10%.
B) 18%.
C) 30%.
D) 42%.

Question

Quizplus · Accepted Answer

6% + 3(14% 6%) = 30%.

Midwest Airline Is Expected to Pay a Dividend of $7