Problem:
Mikkelson Corporation's stock had a required return of 10.50% last year, when the risk-free rate was 3% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged.
Task:
What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.)
16.25%
13.66%
17.07%
16.66%
11.88%