Question

Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0%...

Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) the firm has a beta of 2.30, and (5) its realized rate of return has averaged 15.0% over the last 5 years. Do not round your intermediate calculations.

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Answer #1

We see that the required rate of return is given as equal to=4%+3%+2.30*5%=18.5000%

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