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The Capital Asset Pricing Model (CAPM)

WACC: Wild Widgets, Inc.

If Wild Widgets, Inc. were an all-equity company it would have a beta of 1.55. The company has a target debt-equity ratio of 0.4. The expected return on the market portfolio is 12.9 percent, and Treasury bills currently yield 5.9 percent. The company has one bond issue outstanding that matures in 23 years and has an 6.8 percent

Investing in stocks of 3 companies: Ford, Johnson & Johnson, and Target and calculating the required rate of return for each company. Consider the risk and reward trade-off of each.

I have chosen the following 3 companies to invest stock in Ford Motors (Automotive) Johnson & Johnson (Drug company) Target (Retail Chain) I need help finding the current yield of the 10-year treasury bond and calculating the required rate of return for each of them. I need to be able to show my work and explain how the

Required return: CAPM

Based on the following information, calculate the required return based on the CAPM: Risk Free Rate = 3% Market Return = 10.5% Beta = 1.2

Risk and Return and the Coefficient of Variation

1. Risk & Return and the CAPM. Based on the following information, calculate the required return based on the CAPM: Risk Free Rate = 3.5% Market Return =10% Beta = 1.08 2. Risk and Return, Coefficient of Variation Based on the following information, calculate the coefficient of variation and select the best investm

Expected returns, beta

1) You are considering three stocks with the following expected dividend yields and capital gains: DIVIDEND YIELD CAPITAL GAIN A 14% 0% B 8% 6% C 0 14% A) What is the expected return on each stock? B) How many transactions costs and capital gains taxes affect your choices among the three securities? 3. You are given the

Journal entries & calculations for asset sales are explained.

Can someone please explain in detail (using excel) how I would book the following example: 1. An asset that was purchased in Feb. 2008 for $25,000 has been depreciating via straight line method for the past 4 years. 2. Then, we sold the asset in June 2012 for $1,800. How do I book the transactions and what accounts do I

Capital Valuation - Walmart

Justify the current market price of the organization's (Walmart) debt, if any, and equity using various capital valuation models. - Show calculations that support your findings, including those involving rate of return. - Defend which valuation model best supports your findings.

Risk, return, and the capital asset pricing model

Andrea Corbridge is considering forming a portfolio consisting of Kalama Corp. and Adelphia Technologies. The corporations have a correlation of -0.1789, and their expected returns and standard deviations are as follows: Kalama Corp. Adelphia Technologies Expected returns (%) 14.86 23.11 Standard Deviation (%) 23.36 31.89

Financial Management Appropriate Returns

1. (Capital asset pricing model) MFI Inc. has a beta of .86. If the expected market return is 11.5 percent and the risk-free is 7.5 percent, which is the appropriate return of MFI (using the CAPM)? 2. (Computing bolding-period returns) a. From the price data here, compute the holding-period returns for Jazman and Solomon for

Stock valuation: universal lever, Inc. just paid dividend

1) Stock valuation: universal lever, Inc. just paid dividend of $2.75 on its stock. The growth rate in dividend is expected to be a constant 6 percent per year, indefinitely. Investors require a 16 percent return on the stock for the first three years, a 14 percent return for the next three years, and then an 11 percent return t

Rate of Return and Capital Pricing

1. (Expected rate of return and risk) Summerville Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return of each? COMMON STOCK A COMMON STOCK B PROBABILITY RETURN PROBABILY RETURN .3

Expected Return, Quick Ratio, and Discounted Payback

Question 1: Flying Penguins Corp. has total current assets of $11,845,175, current liabilities of $5,311,020, and an inventory of $7,000,000. What is the quick ratio? Question 2: NBA sensation Jeremy Lin is negotiating a new 5-year contract with the New York Knicks. The Knicks offer him the following "Lincredible" com

Irene has made Sara an offer on the purchase of a capital asset. Irene will pay (1) $200,000 cash or (2) $50,000 cash and a 6% installment note for $150,000 guaranteed by City Bank of New York. If Sara sells for $200,000 cash, she will invest the after tax proceeds in certificates of deposit yielding 6% interest, Sara's cost of the asset is $25,000. Why would Sara prefer the installment sale?

Irene has made Sara an offer on the purchase of a capital asset. Irene will pay (1) $200,000 cash or (2) $50,000 cash and a 6% installment note for $150,000 guaranteed by City Bank of New York. If Sara sells for $200,000 cash, she will invest the after tax proceeds in certificates of deposit yielding 6% interest, Sara's cost of

Internal Gaming Technology: Evaluation of Liquidity

Based on financial statements of Internal Gaming Technology and their background answer the questions below: b. Detailed evaluation of: (1) Short-term liquidity (current debt-paying ability). (2) Cash forecasting and pro forma analysis. (3) Capital structure and solvency. (4) Return on invested capital. Your analysis

Products would not fit the pricing model of market skimming

1. Many companies engage in "market skimming," offering new products at whatever price the market will bear, then over time decreasing the price in order to gain the maximum profit from each market segment. List at least two products that would not fit this pricing model. Discuss why they do not fit this model? 2. When is

Discuss the pros and cons of using this measure

Course: Corporate Finance Discuss the relationship between risk and return and explain it in the context of the company's cost of capital(which is provided in example 1) The CFO gives you the following information to help compose the graph: â?¢The company's beta is 1.2. â?¢The risk-free rate is 3%. â?¢The requir

Economic Growth and Portfolio Analysis

I need to learn how to do the following Review two articles (similar to the ones enclosed) and prepare the following: Brief summary (including the big ideas or major points of the article) along with some synthesis of the ideas and some personal thoughts. Also I need to draw parallels with current events. What i need i

GE Financial Analysis: WACC, Cost of Debt, and Cost of Equity

Please provide in-depth solutions to the financial calculations based on the attached spreadsheet. Calculate the cost of each capital component, after-tax cost of debt, cost of preferred, and cost of equity with the DCF method and CAPM method. Estimate the company's WACC. Some notes on the calculations: Calculating

Portfolio Returns & Risk-Adjusted Performance

Why should investors look beyond just portfolio returns when making investment decisions? Which risk adjusted performance measure is preferred and why? Please include specific details and at least 2 quality references

Average Cost of Capital, Rate of Return and Required Return

You are the CFO of Ford Motor Company (the company) considering taking on a project that requires $10 million in preliminary funding; in other words, the project will acquire $10 million in costs before it becomes profitable. Calculate the the weighted average cost of capital, current rate of return on a risk free asset, bet

Portfolio Required Return, CAPM, Beta, Inonconstant Growth

PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $400,000 1.50 B 600,000 (0.50) C 1,000,000 1.25 D 2,000,000 0.75 CAPM AND REQUIRED RETURN Bradford Manufacturin

The attached spreadsheet uses up to 5 different data-sets to calculate a variety of quantitative measures to compare investments. It is best at evaluating mutual funds and exchange traded index funds, but can also be used to assess technical stock information.

Attached spreadsheet calculates: Compound Annual Growth Rate (CAGR) Sharpe Ratio Beta Treynor Ratio Jensen's Alpha Information Ratio R-Squared Required inputs: Up to 5 price points or return levels for up to two separate investments Up to 5 price points or return levels for a market index Up to 5 price points or