DEF Inc., a conglomerate with multiple business divisions, is evaluating a project in its transportation division. The
Fantastic news! We've Found the answer you've been seeking!
Question:
DEF Inc., a conglomerate with multiple business divisions, is evaluating a project in its transportation division. The transportation industry has an average debt-to-total-assets ratio of 30% and an average levered beta of 1.28. DEF will finance this project with a debt-to-total-assets ratio of 40%. Both DEF and the transportation industry have a tax rate of 40%. The risk-free rate is 5% and the expected market rate of return is 10%. What is the required rate of return for this project?
Select one:
a. 11.4%
b. 10.1%
c. 9.1%
d. 12.1%
Posted Date: