Purchase Solution

Value of Beta for Wal-Mart Company

Not what you're looking for?

Ask Custom Question

Please help me with the following problem pertaining to the value of Beta for Wal-Mart:

Using the PC Quote Web Page find the value of beta for your reference company.

a. What is the estimated beta coefficient of your company? What does this beta mean in terms of your choice to include this company in your overall portfolio?

b. Given the beta of your company, the present yield to maturity on U.S. government bonds maturing in one year (currently about 4.5% annually) and an assessment that the market risk premium (that is - the difference between the expected rate of return on the 'market portfolio' and the risk-free rate of interest) is 6.5%, use the CAPM equation to find out the present 'cost of equity' of your company. Explain the meaning of the 'cost of equity'.

c. Choose two other companies, (Lowes and Sears) look up their "Beta" and report the names of these companies and their betas. Suppose you invest one third of your money in each of the stocks of these companies. What will the beta of the portfolio be? Given the data in (b), what will the Expected Rate of Return on this portfolio be? Do you feel that the three-stock portfolio is sufficiently diversified or does it still have systematic risk that can be diversified away? Explain.

Thanks for helping me! I need approximately 500 words to be able to work off on my own, if you could provide as much, that would be great.

Purchase this Solution

Solution Summary

This solution provides explanations and step by step calculations for beta coefficients, cost of equity, and expected rate of return.

Solution Preview

Note:

*** Remember, this service is not intended to be used as "homework completion, I am ...

Purchase this Solution


Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Introduction to Finance

This quiz test introductory finance topics.