Suppose Vijay TikiTogs, the president, receives a proposal for a


Question Description:

30

Suppose Vijay TikiTogs, the president, receives a proposal for a new share. The investment needed to take a position in the stock is $50 million, it will have an expected return of 18 percent, and its estimated beta coefficient is 2.0. Should the new share be purchased? At what expected rate of return should Vijay be indifferent to purchasing a share?

Answer

30