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
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
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
1) A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant rate of 1.5% over the last 15 years and you expect this to continue. a. If the required rate of return on the stock is 12% what is its fair present market value? b. If the requested rate of return on the stock is 15% what is
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
Please show work you can use either calculator. Other things being equal, an increase in a firm's expected growth rate would cause its required rate of return to a. fluctuate more than before. b. fluctuate less than before. c. decrease. d. increase. e. possibly increase, possibly decrease, or possibly remain constan
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
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
Calculation of shareholders' required rate of return and dividend grwoth rate using the dividend discount model.
A relatively new firm has the dividend payment history shown in Table 9-10. Suppose this stock sells for $8 per share. Estimate the shareholders' required rate of return using the dividend discount model with the following: a. The dividend growth rate calculated over the firm's entire history. b. The growth rate calculated
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
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
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.
Business Policy and Strategy: Performance measures, return on sales & equity, and negative returns to shareholders.
1. Which two of the six performance measures do you think are the most useful indicators of how well a company is being managed? 2. Is return on sales or return on equity a better basis on which to compare the performance of the companies listed? 3. Several companies are highly profitable, yet have delivered negative ret
Your portfolio is diversified. It has an expected return of 10.0% and a beta of 1.10. You want to add 200 shares of Tundra Corporation at $30 a share to your portfolio. Tundra has an expected return of 14.0% and a beta of 1.50. The total value of the investor's current portfolio is $18,000. a. Calculate the expected retur
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?
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
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
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?
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
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:
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
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.
CCT, Inc. expects its current annual $3 per share common stock dividend to remain the same for the foreseeable future. Therefore, the value of the stock to an investor with a required return of 15% is?
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%
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?
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.