Transit Design Inc.recently paid a $1.00 dividend,has a beta of 0.75,has determined that the market risk premium is 10% and the current risk-free rate is 4%.What is the firm's required return on equity?

Question

Quizplus · Accepted Answer

To calculate the firm's required return on equity, we can use the CAPM formula:

r(equity) = r(free) + beta * [r(market) - r(free)]

r(equity) = 4% + 0.75 * (10%) = 11.50%

Therefore, the required return on equity for Transit Design Inc. is 11.50%. None of the other answer choices are correct.