The Jackson Company has just paid a dividend of $3.00 per share on its common stock, and it expects this dividend to grow by 10 percent per year, indefinitely. The firm has a beta of 1.50; the risk-free rate is 10 percent; and the expected return on the market is 14 percent. Which of the following is the required rate of return as per the capital asset pricing model (CAPM) approach??
A. ?9 percent
B. ?12 percent
C. ?7 percent
D. ?16 percent
E. ?18 percent
Answer: D
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