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Beta and Required Return of a Project

Calculate Average Monthly Return, Standard deviation and Beta

See the attached files. a) Following the instructions in the Appendix, obtain monthly returns for these stocks from January 2006 to December 2010. Also, obtain monthly returns for the S&P 500 index over the same period. You do not need to report the monthly returns. Your answers to the remaining questions in this part will r

Capital Budgeting and Financial Analysis Questions

1. What are the three factors that influence the required rate of return by investors? What two components make up the required rate of return on common stock? 2. What is risk premium and what were the risk premium on stocks and the maturity premium on treasury bonds for the ten year period? How is this determined? 3. Wha

Required Rate of Return, Expected Return, Discrete Distribution

See attached file for proper format. Please show all the work. Questions: 1) What types of risk are measured by standard deviation and beta? Which type of risk is more important? Where does correlation fit in? Assume the market risk premium is 5%. Research a current stock and determine its required rate of return usin

Beta and Required Return for Chicago Gear

1) (Beta and required return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here. a. Calculate the expected returns on the stock market and on Chicago Gear stock. b. What is Chicago Gear's beta? c. What is Chicago Gear's required return according to the CAPM? REALIZED

Finance: Portfolio return and risk.

Problem 13. Security A offers an expected return of 15 percent with a standard deviation of 7 percent. Security B offers an expected return of 9 percent with a standard deviation of 4 percent. The correlation between the returns of A and B is +0.6. If an investor puts one-fourth of his wealth in A and three-fourths in B, what

Risk Free Beta Calculations

1. With a beta equal to .95 and a risk-free rate of 5%, if the required return on Carbo Certamics, Inc. is equal to 9%, what is the required return on the market, rm, assuming the maket is in equilibrium? 2. PowerShares Global Agricultural Investment Fund is holding a stock with a beta of 2.0 that is currently in equilibriu

What is ri, the required rate of return on Stock i ?

Suppose rRF=9%, rM=14%, and bi=1.3. a) What is ri, the required rate of return on Stock i ? b) Now suppose that rRF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this affect rM and ri ? c) Now assume that rRF remains at 9% but rM (1) increases to 16% or (2) falls to 13%. T

Require rate of return

Panhandle Faucets (PF) plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt-10%; preferred stock-11%; and common stock-18%. Assuming a 40% marginal tax rate, what after-tax rate of return must PF earn on its inve

Required rate of return calculation on a LR stock.

Little Rock stock is currently selling for $42.86. It is expected to pay a dividend of $3.00 at the end of the year. Dividends are expected to grow at a constant rate of 3% indefinitely. Compute the required rate of return on LR stock.

Required return is implied by the constant growth model

What required return is implied by the constant growth model for a stock that is selling for $25.00 per share and is expected to pay a single cash dividend next year of $1.80, and whose growth in dividend payments is expected to be 2% per year forever?

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

Calculate value, dividend, required rate of return

Calculate the value or the missing component for each of the following securities: Preferred Stock A: Dividend = $3.875, Required Rate of Return = 17%, Value = ? Preferred Stock B: Value = $78, Required Rate of Return = 24%, Dividend = ? Preferred Stock C: Value = $38.75, Dividend = $3, Required Rate of Return = ?

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

Beta value, firm systematic risk and required return rate

1. The stock of Eastman Kodak has an estimated beta of 1.6. How would you interpret this beta value? How would you evaluate the firm's systematic risk. 2. The stock of Apple, Inc, has an estimated beta of 1.5. The current risk free rate is 5% and the market return is 7.4%. What is the required rate of return on he stock?

Required return rate intrinsic value of consolidated stock

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

The answer to Return on Investment

Given the following data: Sales $50,000 Net operating income $5,000 Contribution margin $20,000 Average operating assets $25,000 Stockholders' equity $15,000 Return on investment (ROI) would be:

Constant growth rate: required return and stock price

Alexander Corp. will pay a dividend of $2.60 next year. The company has stated that it will maintain a constant growth rate of 4.5 percent a year forever. If you want a 15 percent rate of return, how much will you pay for the stock? What if you want a 10 percent rate of return? What does this tells you about the relationship bet

Beta and required return calculation

The riskless return is currently ^%, and Chicago Gear has estimated the contingent returns given here. a. Calculate the expected returns on the stock market and on Chicago Gear stock. b. What is Chicago Gear's beta? c. What is Chicago Gear's required return according to the CAPM? see attached for table.

Required rate of return on the market, preferred stock

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%

Return on the market and required rate of return

GE's beta is approximately 1.1, according to the Value Line Investment Survey. Assume the riskless return is 5% and the market risk premium is 10%. What is the return on the market? What is GE's required rate of return?