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Expected Rate of Return using CAPM.

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Richland Manufacturing Inc. has prepared the following information
regarding two investments under consideration. Which investment should be accepted? Please show all calculations,formulas, and details and send it via Word document. Thank you.

COMMON STOCK A COMMON STOCK B
PROBABILITY RETURN PROBABILITY RETURN
.20 -2% .10 4%
.50 18% .30 6%
.30 27% .40 10%
.20 15%

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Solution Summary

The solutuon determines the expected rate of return using CAPM model to determine if the investment should be accepted.

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Answer:
Given that,
Common stock A Common Stock B
Probability Return Probability ...

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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