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Question
DHF Company has a beta of 1.5 and is currently in equilibrium. The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%. Now the required return on an average stock increases by 30.0% (not percentage points). Neither betas nor the risk-free rate change. What would DHF's new required return be?a. 14.89%
b. 15.68%
c. 16.50%
d. 17.33%
e. 18.19%
Answer
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