Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 14.00%. Using the SML, what is the firm's required rate of return? Group of answer choices 13.08% 13.34% 12.95% 10.88% 11.40%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Nagel Equipment has a beta of 0.88
and an expected dividend growth rate
of 4.00% per year. The T-bill rate is
4.00%, and the T-bond rate is 5.25%.
The annual return on the stock market
during the past 4 years was 10.25%.
Investors expect the average annual
future return on the market to be
14.00%. Using the SML, what is the
firm's required rate of return?
Group of answer choices 13.08%
13.34% 12.95% 10.88% 11.40%
Transcribed Image Text:Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 14.00%. Using the SML, what is the firm's required rate of return? Group of answer choices 13.08% 13.34% 12.95% 10.88% 11.40%
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