## Answers

Risk-free rate = Expected return on the market - Risk premium = 14.5% - 8.2% = 6.3%

Required rate of return = Risk-free rate + Beta(Risk premium)

Required rate of return for Tasaco = 0.063 + 0.843(0.082) = 0.1321 or 13.21%

Required rate of return for LBM = 0.063 + 0.615(0.082) = 0.1134 or 11.34%

Required rate of return for Exxos = 0.063 + 0.566(0.082) = 0.1094 or 10.94%

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