1. Magee Company's stock has a beta of 1.20, the risk-free rate is 4.50%, and the market risk premium is 5.00%. What is Magee's required return? 10.25% 10.50% 10.75% 11.00% 11.25% 2. Parr Paper's stock has a beta of 1.40, and its required return is 13.00%. Clover Dairy's s
An analyst has modeled the stock of a company using the Fama-French three-factor model. The risk-free rate is 5%, the required market return is 10%, the risk premium for small stocks (rSMB) is 3.2%, and the risk premium for value stock (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's required return.
An analyst has modeled the stock of a company using the Fama-French three-factor model. The risk-free rate is 5%, the required market return is 10%, the risk premium for small stocks (rSMB) is 3.2%, and the risk premium for value stock (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's required r
1) .. Which stock is riskier in a portfolio context? Which stock is riskier if you are not considering them in a portfolio? Explain. (5) 2) Compute the expected return on the portfolio. (5) 3) Compute the beta for the portfolio. (5) 4) Given the following information, Compute is the expected return on General Motors. (5)
You have the following information on the two securities in which you have invested Expected Standard Security Amount Return Probability Deviation Beta Invested Kodak 15% .35 4.5% 1.20 $45,000 Xerox 12% .65 3.8% 0.98 $55,000 1) .. Which stock is riskier in a po
a) What should the investor's required rate of return be in order to buy Consolidated? b) What is the intrinsic value of Consolidated stock? c) What is the expected rate of return on Consolidated stock? d) Does the expected rate of return for Consolidated beat the market index return?
One of your client's is looking at an investment in the Consolidated Sprockets, Inc. which sells for $52.60 per share, and paid a recent annual dividend of $2.40. Dividends are expected to increase at 5.45% annually. The current risk free rate is 4.15% and the NYSE market index is returning 14.71%. The beta of Consolidated is .8
MANAGERIAL FINANCE: Practice Problems (Please provide the formula for each problem and calculations) 1. Chris recently purchased a corporate bond which yields 12%. Chris is the 39% combined federal and state tax bracket. What is the bond's after-tax yield? 2. Corporate bonds issued by Porter Corporation currently yield
1. The returns on the market, the returns on United Fund (UF), the risk-free rate, and the required return on the United Fund are shown below. Assuming the market is in equilibrium and that beta can be estimated with historical data, what is the required return on the market, rM? Year Market UF 2003 -9%
Please see attached file. 1) You are the money manager of a $10 million investment fund that consists of 2 stocks with the following investment and betas. Assume that the CAPM holds, and kRF=6%, kM=14%. Stock Investment Beta A $ 4 million 1.2 B $ 6 million 1.4 A. What is the expected return of the fund? B. What is beta
Please see attached file.
1. The questions for this assignment is to explain the difference between the average return calculated in Problem 10-6 (a) and the realized return calculated in 10-5. Are both numbers useful? If so, explain why. To do this assignment the two problems had to be answered. Although you will see problem 10-5 and10-6 in th
You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio's new beta be after these
Consider the following information and then calculate the required rate of return for the Global Investment Fund, which holds 4 stocks. The market's required rate of return is 16.25%, the risk-free rate is 7.00%, and the Fund's assets are as follows: Stock Investment Beta A $200,000 1.50 B $300
Suppose rRF = 5%, rM = 10%, and rA = 12%. a. Calculate Stock A's beta. b. If stock A's beta were 2.0, what would be A's new required rate of return?
Bertin Bicycles has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 11.50%. Using the SML, what is Bertin's
Can you help me get started with this assignment? The last dividend that was paid yesterday (D0) on a Corporation's common stock was $8.00, and the expected growth rate is 0 percent. The required rate of return on this stock is 10 percent. 1. What is the present value of the future growth opportunity represented by the 5%
Ten years ago J-Bar Company purchased a lathe for $250,000. It was being depreciated on a straight-line basis to an estimated $25,000 salvage value over a 15 year period. The firm is considering selling the old lathe and purchasing a new one. The new lathe would cost $500,000. The firm's marginal tax rate 40 percent. Determine t
Please see the attached file. The next dividend payment by Carroll, Inc., will be $4.45 per share. The dividends are anticipated to maintain a 5 percent growth rate, forever. If the stock currently sells for $43 per share, the required return of the stock is percent The next dividend payment by Carroll, Inc., will be
A publicly traded construction company has had the following stock prices (in attached spreadsheet), the index prices are also available (second page of spreadsheet). calculate the beta using Linest. The market beta is 1.20. If the calculated beta varies from published, explain why. Stock Prices: Date,Open,High,Low,Close,Vo
Last week the price of a company's common stock closed at $27.00 per share. Use the weekly stock price and index value data in the table below to compute the company's beta, then use the beta to estimate the company's required cost of equity. Assume the appropriate risk-free rate is 5.5% and the market risk premium is 6.5%.
Find 5 actively traded stocks and record their prices at the start and the end of the most recent calendar year. Also, find the amount of dividends paid on each stock during that year and each stock's beta at the end of the year. Assume that the 5 stocks were held during the year in an equal dollar weighted portfolio (20% in eac
Portfolio expected return, expected rate of return on the company's stock, effect of changes in inflation and market risk premium on return on stocks, operating net cash, leverage
Question 11: Stock A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of 1.2. Portfolio P has 1/3 of its value invested in each stock. Each stock has a standard deviation of 25%, and their returns are independent of one another, i.e., the correlation coefficients between each pair of stock is zero. Assuming t
USE THE FOLLOWING INFORMATION FOR THE NEXT FOUR PROBLEMS Stock Rit Rmt ai Beta A 10.6 15 0 0.8 Z 9.8 8.0 0 1.1 Rit = return for stock i during period t Rmt = return for the aggregate market during period t 1. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (
1) Morgan Entertainment has a levered beta of 1.20. The firm's capital structure consists of 40% debt and 60% equity and it has a corporate tax rate of 40%. What is Morgan's unlevered beta? 2) Rhino Inc. hired you as a consultant to help them estimate their cost of capital. You have been provided with the following data: D1
MSA Computer Corporation manufactures two models of minicomputers, the Alpha 4 and the Beta 5. The firm employs five technicians, working 160 hours each per month, on its assembly line. Management insists that full employment (i.e., all 160 hours of time) be maintained for each worker during next month's operations. It requires 20 labor hours to assemble each Alpha 4 computer and 25 labor hours to assemble each Beta 5 model. MSA wants to see at least 10 Alpha 4s and at least 15 Beta 5s produced during the production period. Alpha 4s generate$ 1,200 profit per unit, and Beta 5s yield $1,800 each. Determine the most profitable number of each model of minicomputer to produce during the coming month.
MSA Computer Corporation manufactures two models of minicomputers, the Alpha 4 and the Beta 5. The firm employs five technicians, working 160 hours each per month, on its assembly line. Management insists that full employment (i.e., all 160 hours of time) be maintained for each worker during next month's operations. It requires
Beta and Required Return The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here. Realized Return State of the Market Probability that State Occurs Stock Market Chicago Gear Stagnant 0.20 -10% -15% Slow Growth 0.35 10% 15% Average Grow
Can you help me get started with this assignment? TABLE 1: Market Data Middle Ltd Extra Inc. Year Market Index Stock Price Dividend Stock Price Dividend 0 7500.00 30.00 75.00 1 7835.76 30.68 0.74 75.60 5.30 2 8715.18 36.49 0.76 76.32 5.37 3 9120.94 42.
Problem:Please complete all of the problems on the attached spreadsheet, please include formulas on the spreadsheet and put answers on the spreadsheet underneath each question. Please complete all ...there is moreshow problemPlease complete all of the problems on the attached spreadsheet, please include formulas on the spreadsh
Common stock A has an expected return of 10%, a standard deviation of future returns of 25%, and a beta of 1.25. Common stock B has an expected return of 12%, a standard deviation of future returns of 15%, and a beta of 1.50. Which stock is riskier? Why is beta an important part of the equation? Explain.
A. What is the expected return and volatility (standard deviation) of your investment? b. What is your realized return if J goes up 25% over the line? c. What return do you realize if J falls by 20% over the year?
Suppose you have $100,000 in cash, and you decide to borrow another $15,000 at a 4% interest rate to invest in the stock market. You invest the entire $115,000 in a portfolio J with a 15% expected return and a 25% volatility. a. What is the expected return and volatility (standard deviation) of your investment? b. What
A company's production facility, consisting of two identical machines, currently caters only to product A. The annual demand for the product is 4000 units. Management has now decided to introduce another product, B, which uses the same facilities as that of product A. Product B has an annual demand of 2000 units. In view of the
If you wanted to retire on 75k per year, and you are 35 years old and have 25k saved, how much do you need to put away every year so that you can retire? Please tell me what rate of return you would use and why. We will assume you will live for 25 years after you retire. For this exercise, you can spend every penny and not wo