question archive King Farm Manufacturing Company's common stock has a beta of 0
King Farm Manufacturing Company's common stock has a beta of 0
Subject:AccountingPrice:2.86 Bought7
King Farm Manufacturing Company's common stock has a beta of 0.61. If the risk-free rate is 3.44 percent, and the market return is 5.95 percent, calculate the required return on King Farm Manufacturing's common stock.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Required Return = 4.97%
Step-by-step explanation
Using Capital Asset Pricing Model
Required Return = Risk Free Return + Beta*(Return on Market - Risk Free Return)
= 3.44% + 0.61*(5.95%-3.44%)
= 3.44% + (0.61*2.51%)
= 3.44% + 1.5311%
= 4.97%
