Explain Finding required rate of return using CAPM formula
A. During 2007, a firm has sold 5 assets described below.
Calculate the tax liability on the assets. The firm pays a 40 percent tax rate on ordinary income.
|
Asset
|
Purchase
Price
|
Sale
Price
|
|
1
|
$10,000
|
$12,000
|
|
2
|
$50,000
|
$40,000
|
|
3
|
$37,500
|
$50,000
|
|
4
|
$ 3,000
|
$ 3,500
|
|
5
|
$15,000
|
$12,000
|
B. Russo's Gas Distributor, Inc. wants to determine the required return on a stock portfolio with a beta coefficient of 0.5.
Assuming the risk-free rate of 6 percent and the market return of 12 percent, compute the required rate of return