If the risk-free rate is 6 percent, the return on an average stock is 10 percent, and the beta of a capital budgeting project is 1.50, the project's required rate of return from the project is . a. 19% b. 21% c. 24% d. 12% e. 4%

r = 0.12 or 12%

Option d is the correct answer.

Explanation:

Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.  

The formula for required rate of return under CAPM is,

r = rRF + Beta * (rM - rRF)

Where,

We assume that the return on an average stock in the market is the return on market or rM.

r = 0.06 + 1.5 * (0.1 - 0.06)

r = 0.12 or 12%

our agriculture industry and our business industry

a

explanation:

reducti0n

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