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# Beta and Required Return of a Project

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### Constant Growth Stock: Harrison Clothiers required rate of return; price of stock

Harrison Clothiers stock currently sells for \$20 a share. It just paid a dividend of \$1.00 a share. The dividend is expected to grow at a constant rate of 6% a year. What stock price is expected 1 year from now? What is the required rate of return?

### Calculation of Required Rate of Return on a Stock

Assume that the risk-free rate is 6% and the expected return on the market is 13%. What is the required rate of return on a stock with a beta of .7?

### Required rate of return for stock with 0.7 beta

Assume that the risk free rate is 6% and the expected return on the market is 13%. What is the required rate of return on a stock with a beta of 0.7?

### Present Value of Growth Opportunities: Blue Mountain, Inc

4. Blue Mountain, Inc. announces that it will invest \$140 million in projects each year forever. All projects are expected to generate a 14% rate of return on its beginning-of-period book value each year for five years. The required return for this type of project is 11%. Blue Mountain, Inc. depreciates its cost of assets straig

### Woidtke: Required Rate of Return on the Company's Stock

Woidtke Manufacturing's stock currently sells for \$20 a share. The stock just paid a dividend of \$1.00 a share (i.e, D0 = \$1.00). The dividend is expected to grow at a constant rate of 10% a year. What stock price is expected 1 year from now? What is the required rate of return on the company's stock?

### Return and Risk: a. For each project, compute 1. the range of possible rates of return 2. the expected value of return 3. the standard deviation of the returns 4. the coefficient of variation of the returns b. Construct the bar chart of each distribution of rates of return c. Which project would you consider less risky? why?

Swift Manufacturing must choose between two asset purchases. The annual rate of return and the related probabilities given in the table. Project 257 Project 432 Rate of return Probability Rate of return Probability -10% 0.01 10%

### ROI Calculation - Cafe Bustelo common stock transaction

Cafe Bustelo pays a constant annual dividend. One year ago, when I purchased shares of this stock at \$40 a share, the dividend yield was 6.5 percent. Over this past year, the inflation rate has been 3.2 percent. Today, the required return on this stock is 9.8 percent and I just sold all of my shares. What is my total real retur

### calculate stock value from dividends

Firm X just paid an annual dividend of \$1.50 and is expected to pay annual dividends of \$1.65 and \$2.805 per share the next two years, respectively. After that, the firm expects to maintain a constant dividend growth rate of 5 percent per year. What is the value of this stock today if the required return is 13 percent? 1. \$

### Return on investment..

Return on investment is the result of multiplying ?: Return times investment or Profit times operating assets or Return on sales (ROS) times asset turnover or Return on assets (ROA) times asset turnover or Margin on sales (MS) times return on assets

### Computation of Return, Variance and Beta

You are given the following joint probability distribution of returns: State Probability Stock 1 Stock 2 Good 0.6 20.0% 9.0% Bad 0.4 8.0% -6.0% Beta of stock 1=1.4 Beta of stock 2=0.6 a. Find the expected return on Stock 1,and Stock 2. b. Find the variance of return on Stock 1, and Stock 2 c

### The Denny Corporation common stock has a current price of \$90, is expected to pay a dividend of \$10. The company growth rate (g) is 11%. Estimate the expected rate of return on Denny Corp stock.

1.The Denny Corporation common stock has a current price of \$90, is expected to pay a dividend of \$10. The company growth rate (g) is 11%. Estimate the expected rate of return on Denny Corp stock.

### Required return

Beta is 1.20, risk free rate is 4.5%, market risk premium is 5.00%, what is required return?

### Beta of the portfolio

An investment banker has recommended a \$100,000 portfolio containing assets B, D, and F. \$20,000 will be invested in asset B, with a beta of 1.5; \$50,000 will be invested in asset D, with a beta of 2.0; and \$30,000 will be invested in asset F, with a beta of 0.5. The beta of the portfolio is a. 1.25 b. 1.3

### FINANCE

Is the best solution letter B, D or E ?? Stock C has a beta of 1.2, while Stock D has a beta of 1.6. Assume that the stock market is efficient. Which of the following statements is most correct? a. The required rates of return of the two stocks should be the same. b. The expected rates of return of the two stocks should

### Finance Question: Stock C has a beta of 1.2; Stock D has a beta of 1.6.

Stock C has a beta of 1.2, while Stock D has a beta of 1.6. Assume that the stock market is efficient. Which of the following statements is most correct? a. The required rates of return of the two stocks should be the same. b. The expected rates of return of the two stocks should be the same. c. Each stock should have a r

### Expected Stock Return in Market

A stock has an expected return of 9 percent, its beta is 0.45, and the risk-free rate is 4.95 percent. The expected return on the market must be ______ percent? round answer to 2 decimal places. I keep using the formula E(Ri)=Rf+{E9Rm)- Rf} x Bi and answer does not look right.

### Present Value Analysis..

Determine the value of \$1,000 denomination Bell South bond with a 7 percent coupon rate maturing in 20 years for an investor whose required rate of return is: A. 8 percent B. 7 percent C. 5 percent

### Calculating beta, RR and COE

Please provide detailed working for the following problems. 1. Heks stock has a beta of 1.50, its required return is 14% and the risk -free rate is 5.00% what is the required rate of return of the stock market (hint first find the market risk premium) My answer is 10.50% 2. The company last dividend was \$1.00. its divi

### Lama Case Study: Stock Dividend, Price, Management, Growth Rate

Assume that Lama's stock has a beta of 1.6 while the risk-free rate is 10% and the mean return on the market is 15%. a. If the dividend expected during the coming year is \$2.50 and the growth rate is a constant 5%, what is the equilibrium price for Lana's stock? b. Now suppose the Federal Reserve Board increases the money

### Difference in 2 Companies' ROR

Kamath Manufacturing Company has a beta of 1.45, while Gehr Industries has a beta of 0.85. The required return on the stock market is 12.00%, and the risk-free rate is 5.00%. What is the difference between Kamath's and Gehr's required rates of return? (Hint: first, find the market risk premium, then find required returns on t

### A stock had a 12% return last year, a year when the overall stock market declined. Does this mean that the stock has a negative beta and thus very little risk if held in a portfolio?

A stock had a 12% return last year, a year when the overall stock market declined. Does this mean that the stock has a negative beta and thus very little risk if held in a portfolio? Can you please explain that

### The Probability Distribution of a Less Risky Expected Return

The probability distribution of a less risky expected return is more peaked than that of a riskier return. What shape would the probability distribution have for (a) completely certain returns and (b) completely uncertain returns?

### Monthly return, ARP and effective annual return

Having trouble solving this problem. Thanks! Live Forever Life Insurance Co. is selling a perpetuity contract that pays \$1,200 monthly. The contract currently sells for \$63,000. What is the monthly return, apr, and effective annual return on this investment vehicle?

### Required rate of return on stocks, beta, stock price, expected growth

2. Company X just paid a \$2.40 per share dividend on its common stock yesterday (i.e., D0 = \$2.40). The dividend is expected to grow 25 percent a year for the next three years, after which time the dividend is expected to grow at a constant rate of 5 percent a year for ever. The stock's beta is 1.2, the risk-free rate of intere

### Calculating Beta - Company L

Using available information from the financial statement (attached) of Company L and public market data for the S & P 500 index, Please calculate the beta of company L according to the following instructions: Recommended discount rate for this sample exercise: 12% Steps 1. Estimate Company L's market value each year f

### Required Rate of Return MCQ

Find the required rate of return for equity investors of a firm with a beta of 1.3 when the risk free rate is 5%, the market risk premium is 5%, and the return on the market is 10%. A) 11.5% B) 13.0% C) 16.5% D) 18.0%

### Unlevered and Levered Beta

I need to see intermediate steps and formulas. California Real Estate, Inc. currently is an all-equity firm, the current expected rate of return on the firm's equity is 20%, risk free rate is 5% and the market risk premium is 10%. The firm is considering a capital structure change from zero debt to a debt-to-equity ratio .5,

### If a stock consistently goes (up) down by 1/6% when the market portfolio goes (up) down by 1.2%, then its beta

If a stock consistently goes (up) down by 1/6% when the market portfolio goes (up) down by 1.2%, then its beta:

### Required Rate of Return: Oakdale Furniture, Inc

Data for Oakdale Furniture, Inc. is shown below. Now the expected inflation rate and thus the inflation premium increase by 2.0 percentage points, and Oakdale acquires risky assets that increase its beta by the indicated percentage. What is the firm's new required rate of return? Beta 1.50 Required Return 10.20% RPm

### Expected return, variance and beta

Dear OTA, Please explain with steps. Thanks Please see attached file for full problem description. a. Calculate the expected return, variance, and beta of a portfolio constructed by investing 1/3 of your funds in asset A and 2/3 in asset B.