GPS Inc wishes to estimate its cost of retained earnings. The firm's beta is 1.3. The rate on 6-month
T-bills is 2%, and the return on the S&P 500 index is 15%.
What is the appropriate cost for retained
earnings in determining the firm's cost of capital?
A) 17.0% B) 19.5% C) 22.1% D) 18.9%
D
You might also like to view...
Although companies pursue different competitive strategies, all strategies deal with plans for
a. offering the lowest prices in the industry. b. competing successfully. c. keeping profit margins as high as possible. d. offering a broad range of products or services for just about every type of buyer.
Which of the following did NOT occur in the life insurance industry during the most recent financial crisis?
A. Low equity values reduced asset-based fees on separate account assets. B. Losses were incurred on holdings of commercial mortgage-backed securities and commercial loans. C. Asset-based fees declined on products such as variable annuities and pension fund assets that were tied to equity returns. D. Low interest rates and harsh economic conditions caused many policyholders to terminate or surrender their policies. E. Historically low interest rates caused increased demand for whole life policies.