Use the following information to answer the question(s)below. The risk-free rate of interest is 3% and the market risk premium is 5%.
-The value of the oil exploration division is closest to:
A)$4500
B)$7500
C)$8750
D)$10,000

Question

Use the following information to answer the question(s)below.  The risk-free rate of interest is 3% and the market risk premium is 5%.
-The value of the oil exploration division is closest to:
A)$4500 
B)$7500 
C)$8750 
D)$10,000

Quizplus · Accepted Answer

B)r_i = r_rf + β(r_m - r_rf)= .03 + 1.4(.05)= .10 or 10.0% V = 11ea7cce_3d17_36aa_928c_6fe8b8965508_TB1626_11 = 11ea7cce_3d17_5dbb_928c_1f7fc207f144_TB1626_11 = $7500

Use the Following Information to Answer the Question(s)below