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Sagot :
So, the lowest return, the company should accept for the Investment is 10.50%.
Required Return on Equity = Risk-free rate of Return + (Beta × Market risk premium)
So, required return = 2% + (1.5×6%) = 9%
So, the company should choose a project which has a Return greater than 9%
Out of options provided greater than 9% 10.50%,12.50%, and 15.25%
So, the lowest return, the company should accept for the Investment is 10.50%.
The return on equity (ROE) is a measure of the profitability of an enterprise when it comes to equity. due to the fact, shareholder's equity may be calculated by way of taking all assets and subtracting all liabilities, ROE can also be the concept of a go-back on property minus liabilities. ROE measures what number of greenbacks of earnings are generated for every dollar of shareholder's fairness. ROE is a metric of how nicely the agency makes use of its equity to generate earnings.
ROE = net income/equity
ROE is identical to a financial 12 months internet profits (after preferred stock dividends, earlier than not unusual inventory dividends), divided by way of general equity (with the exception of preferred stocks), expressed as a percent.
ROE is specially used for comparing the overall performance of groups within an identical enterprise. As with return on capital, an ROE is a measure of control's capability to generate profits from the equity to be had to it. at the same time as better ROE ought intuitively to suggest better stock charges, in reality, predicting the stock cost of a corporation based on its ROE is dependent on too many different elements to be of use via itself.
To learn more about Return on Equity (ROE) visit here:
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