The higher an asset's beta, __________ the more responsive it is to changing market returns, the less responsive it is to changing market returns, the higher the expected return will be in the down market, or the higher the expected return will be in an up market Please advise answer & why - thanks!
What is the cost of equity for a firm for which the required return on assets is 14%, the cost of debt is 11%, and the target debt/equity ratio is 0.5? Ignore taxes. a) 11.0% b) 12.5% c) 14.0% d) 15.5% e) 16.0%
What is the risk premium and beta for a 3 month T-bill?
If MSFT's next years dividend is expected to be 4.00 and the growth rate of the dividend is expected to be 14% forever, then what is the required rate of return for the stock given if it is currently trading at $30 a share.
Whizzkid, Inc, is experiencing a period of rapid growth. Earnings per share is expected to grow at a rate of 15 percent during the next two years, 13 percent in the third year, 10 percent in the fourth year, and at a constant rate of 6 percent thereafter. The firm just provided $5.00 EPS for the last year. If the required rate o
What are the three factors that influence the required rate of return by investors?
BACKGROUND: Ponza International has three divisions. One is engaged is leisure wear, one in graphics, and one in household paint. The company has identified proxy companies in these lines of business whose stocks are publicly traded. Neither Ponza International nor the proxy companies employ debt in their capital structures
Briefly describe Sears, Roebuck and Co. Give three examples of responsibility centers for Sears, Roebuck and Co.. Describe how these responsibility centers interact.
Using 5 years of monthly returns, I have estimated the historical equity beta of a company to be 1. During this span of time, the company's debt structure was stable, with the total debt-to-total asset ratio averaging .40 & the company's tax rate was 46%. Estimate the historical unlevered beta.
An investment of $20 in Stock A is expected to pay no dividends and have value of $24 in 1 year. An investment of $70 in Stock B is expected to generate a $2.50 dividend next year and price of its stock is expected to be $78. 1) What are the expected returns 2) If the required return is 10%, which stock(s) should be profit
Company Alpha has a beta of 1.6, while Company Omega's beta is 0.7. The risk-free rate is 7%, and the required rate of return on the average stock is 12%. Now the expected rate of inflation built into krf rises by one percentage point, the real risk-free rate remains constant, the required rate on the market increases to 14%, an
A money manager is managing the account of a large investor; the investor holds the following stocks: STOCK AMOUNT INVESTED ESTIMATED BETA A $2,000,000 0.80 B $5,000,000 1.10 C $3,000,000 1.40 D $5,000,000 ???? The portfolio's required rate of return is 17%; the risk-free rate is 7% and the required
Assume that you hold a portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, assume that you decide to sell one of the stocks in your portfolio with a beta equal to 1.0 for $7,500 and use these proceeds to buy another stock for your portfolio. Assume that the
An investment fund has total capital of $500 million invested in 5 stocks: STOCK INVESTMENT STOCK'S BETA COEFFICIENT A $60 million 0.5 B $120 million 2.0 C $80 million 4.0 D $80 million 1.0 E $60 million 3.0 The beta coefficient for the fund can be found as a we
Estimate expected returns and find the beta and the return on the fund. 1. You use a factor model to estimate expected returns on Daemon stock. The risk-free rate is 3%. You have the following information: Factor Factor Beta Risk Premium GNP .80 .49% Inflation 1.20 -.83% Market .45 6.36% 2. Honest Dave's Used Mu
A firm is expected to pay a cash dividend of $1.10 one year from now, $2.20 two years from now, and $4.40 three years from now. Also, the market price of their common stock is expected to be $73 immediately following the dividend payment three years from now. What is the approximate current market value of this firm's common s
Garage, Inc., is expected to maintain a constant 5 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 7.5 percent, what is the required return on the company's stock? What is the formula to solve this?
Is there a way to do this on a spreadsheet? If so, please show me. Fuel, Inc., has an issue of preferred stock outstanding that pays a $4.50 dividend every year, in perpetuity. If this issue currently sells for $46 per share, what is the required return?