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Beta and Required Return of a Project

Calculate the required rate of return

The company is paying the dividend of $4.37 and has a growth rate of 6.5%. The stock is currently selling for $175. Calculate the required rate of return.

Multiple Choice Question about Required Rate of Return

Consider the following information and then calculate the required rate of return for the Scientific Investment Fund, which holds 4 stocks. The market's required rate of return is 15.0%, the risk-free rate is 7.0%, and the Fund's assets are as follows: Stock Stock Investment Beta A

Beta

You are holding a stock with a beta of 2.0 that is currently in equilibrium. The required rate of return on the stock is 15% versus a required return on an average stock of 10%. Now the required return on an average stock increases by 30.0% (not percentage points). The risk-free rate is unchanged. By what percentage (not percent

Risk and Reward with Stocks

Historically high return stocks have exhibited lower risk than low return stocks--just the opposite what the SML (Security Market Line) predicts. Wall Street (and unsuspecting financial planners) has been very successful in selling main street the story that higher risk = higher reward, while the smart money knows this and is ab

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

Actual vs Expect Return on Stocks

Do you think that the actual return on each stock for this period will be the same as the expected return (calculated as risk-free rate + market risk premium x beta)? Why or why not?

What Price Should the Stock Sell For?

Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell? a. $104.27 b. $106.95 c. $109.69 d. $112.50 e. $115.38.

Alpha Corp.: Going Forward with the Acquisition

Alpha Corporation is considering buying Beta Corporation for $2,400,000 cash. Beta Corporation has a $600,000 tax loss carryforward that could be used immediately by Alpha Corporation. Alpha Corporation pays tax at the rate of 35%. Beta Corporation will provide $300,000 per year in cash flow (in after tax income plus depreciatio

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.

Calculate required return on stock indefinitely

Siblings inc. is expected to maintain a constant 5.8 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.7 percent, what is the required return on the company's stock? Please show work.

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