Problem:
The DMT Company is financed entirely with equity. DMT has a beta of 1.20 and the current risk-free rate is 9.5 percent. If the expected market return is 14 percent,
Required:
Question: What rate of return should DMT require on a project of average risk?
a. 14.9%
b. 15.4%
c. 14.0%
d. 12.0%
Note: Please show the work not just the answer.