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Financial Problem: Determing the rate of return.

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The DMT Company is financed entirely with equity. DMT has a beta of 1.20 and the current risk-free rate of 9.5%. If the expected market return (Km)is 14%, what rate of return should DMT require on a project of average risk? [ke=krf + (km-krf)(B)]

The following choices are one of the answers:
a. 14.9%
b. 15.4%
c. 14.0%
d. none of the above

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The rate of return is determined. The response received a rating of "5" from the student who posted the question.

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