The real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, the market risk premium is 4.70%, and Kohers Enterprises has a beta of 1.10. What is the required rate of return on Kohers' stock? a. 9.43% b. 9.67% c. 9.92% d. 10.17% e. 10.42%
Yonan Corporation's stock had a required return of 11.50% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2%. The risk-free rate and Yonan's beta remain unchanged. What is Yonan's new required r
Boomer Products, Inc. manufactures "no-inhale" cigarettes. As their target customers age and pass on, sales of the products are expected to decline. Thus, demographics suggest that earnings and dividends will decline at a rate of 5% annually forever. The firm just paid a dividend of $4; given a required return of 10%, what shoul
Please see and use the attched excel spreadsheet! Thank you! Assume that Jason Kidwell is able to purchase Toy's Things, Inc., for $2.2 million. Jason estimates that after initiating his changes in the company's operations, the firm's cost of goods are 55% of firm revenues and operating expenses are equal to a fixed component
Suppose Intel stock has a beta of 2.16 whereas Boeing stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Intel stock and 40% Boeing stock, according to the CAPM?
Your portfolio has three asset classes: U.S. government T-bills account for 45% of the portfolio, large-company stocks constitute another 40%, and small-company stocks make up the remaining 15%. If the expected returns are 3.8% for the T-bills, 12.4% for the large-company stocks, and 17.5% for the small-company stocks, what is
How would you describe beta? How does beta assist in identifying the different levels of risk? When would you use beta?
You work for an large investment firm and recently wrote a position article on your firm's approach to investing for the small investor, titled "Investing is for the little guy". The article now appears on your company's website. It has, interestingly enough, generated e-mailed responses from potential clients and your firm is a
Jane is considering investing in three different stocks or creating three distinct two-stock portfolios. Jane considers herself to be a rather conversative investor. She is able to obtain forecasted returns for the three securities for the years 2010 through 2016. Year Stock A Stock B Stock C 2010
Risk analysis: a. determine the range of the rates of return for each of the two projects b. which project is less risky? why? c. if you were making the investment decision, which one would you choose?
Lunar Designs is considering an investment in an expanded product line. Two possible types of expansion are being considered. After investigating the possible outcomes, the company made the estimates shown in the following table: Expansion A Expansion B Initial investment $12,000 $12,000 Annual rate of return Pessimistic
Can you help me get started with this assignment? In reviewing the background materials of the company "Visa" on the concept of the required rate of return, 1. What factors do you think determine the required rate of return of Visa? 2. Do you think Visa should have a higher or lower required rate of return than the ave
Okefenokee Real Estate Co: What is the required return on stock, cost of capital, and discount rate?
The total market value of the common stock of the Okefenokee Real Estate Company is $6 million, and the total value of its debt is $4 million. The treasurer estimates that the beta of the stock is currently 1.5 and that the expected risk premium on the market is 6 percent. The Treasury bill rate is 4 percent. Assume for simplici
6. A stock just paid a dividend of $1. The required rate of return is rs = 11%, and the constant growth rate is 5%. What is the current stock price? $15.00 $17.50 $20.00 $22.50 $25.00 7. The Lashgari Company is expected to pay a dividend of $1 per share at the end of the year, and that dividend is expected
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?
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
Is the beta of a stock static or dynamic? What could affect the beta of a stock?
A stock just paid a dividend of $1. The required rate of return is rs = 11%, and the constant growth rate is 5%. What is the current stock price?
1. Harrison Clothiers' stock currently sells for $20 a share. It just paid a dividend of $1.00 a share (that is D0 = $1.00). The dividend is expected to grow at a constant rate of 6 percent a year. What stock price is expected 1 year from now? What is the required rate of return? 2. A stock is expected to pay a dividend o
Question 18: (2 points) The Consumer Products Division of Goich Corporation had average operating assets of $792,000 and net operating income of $90,300 in May. The minimum required rate of return for performance evaluation purposes is 6%. What was the Consumer Products Division's minimum required return in May? $5
Suppose that a foreign project has a beta of 1.12, the risk free return is 9.3% and the required return on the market is estimated at 18%.
Suppose that a foreign project has a beta of 1.12, the risk free return is 9.3% and the required return on the market is estimated at 18%. Then the cost of capital for the project is A) 17.21% B) 21.37% C) 19.04% D) 20.03% Suppose that the current 90 day London interbank offer rate is 11% (all rates are stated on
1-A2 Management by Exception Beta Alpha Psi (BAP), the accounting honorary fraternity, held a homecoming party. The fraternity expected attendance of 70 persons and prepared the following budget: Room rental $ 140 Food $ 700 Entertainment $ 600 Decorations $ 220 Total $1,660 Afte
You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is 8% rather than 11% ?
7. You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is 8% rather than 11% ? If so, what should you do?
Constant growth stock valuation Fletcher Company's current stock price is $ 36, its last dividend was $ 2.40, and its required rate of return is 12 percent. If dividends are expected to grow at a constant rate, g, in the future, and if rs is expected to remain at 12 percent, what is Fletcher's expected stock price 5 years from n
Investors expect the market rate of return this year to be 14 percent. A stock with a beta of .8 has an expected rate of return of 12 percent. If the market return this year turns out to be 10 percent, what is your best guess as to the rate of return on the stock?
Question: The Consumer Products Division of Goich Corporation had average operating assets of $782,000 and a net operating income of $89,300 in May. The minimum required rate of return for performance evaluation purposes is 9%. What was the Consumer Products Division's residual income in May? $18,920 $20,220 -$18,920 -$
On April 21, 2006, Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motors, offered some securities for sale to the public. Under the terms of the deal, TMCC promised to repay the owner of one of these securities $10,000 on April 23, 2036, but investors would receive nothing until then. Investors paid TMCC $1,163 f
Swift Manufacturing must choose between 2 asset purchases. The annual rate of return and the related probabilities are given in the attached table summarize the firm's analysis to this point. Project 257 Project 432 Rate of return Probability Rate of return Probability -10% 0.
Quinn Electric Company has outstanding a bond issue that will mature to its $1,000 par value in 12 years. The bond has a coupon rate of 15% and pays the interest annually. a) Find the value of the bond if the required return is (1) 10 percent, (2) 15 percent and (3) 17 percent. b) Use your findings in part a) to discuss the
Problem1 Bass Chemical, Inc., is considering expanding into a new product line. New assets to support expansion will cost $1,200,000. Bass estimates that it can generate $2 million in annual sales, with a 5 percent profit margin. What would net income and return on assets (investment) be for the year? Problem 2 Hugh Snore B
Utilizing the following information, compute the firm's return on equity. Balance Sheet (000) Current Assets 1,500 Current Liabilities 910 Fixed Assets 7,000 Long term Liabilties 1200 Common Stock(at par) 2000
1. A stock has an expected return of 13.6 percent, the risk free rate is 4 percent, and the market risk premium is 7.5 percent. What must the beta of this stock be? 2. A portfolio has an annual variance of .0607. What is the standard deviation over a two month period.