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
Performance Metrics: Calculate Sharpe ratio, Treynor ratio, Jensen's alpha, information ratio, and R-squared
Detailed spreadsheet for calculating mutual fund or equity financial performance. Calculates CAGR, Sharpe Ratio, Treynor Ratio, Beta, Jensen's Alpha, Information Ratio, Tracking Error and R-Squared. Uses two hypothetical mutual funds ("Papa" and "Mama") as case study for comparison. Includes references. When you pick the best
Now that you have read about the CAPM, would you ever use it to make personal investment decisions? Consider the following: What is the main message of the CAPM? It evolves from the notion that investors in general aren't stupid: they diversify their investment funds into a well diversified portfolio. Therefore, if we all
See attached file for proper format of the tables. Please show all your work so I can understand everything. 1. Buxton Corporation is planning to invest in a security that has several potential rates of return. Using the following probability distribution of returns during different states of the economy, what is the expec
Corporate Finance Exercise: Correlation and Beta - CAPM You have been provided the following data about the securities of tree firms, the market portfolio, and risk-free: Security Expected return Standard deviation Correlation* Beta Firm A .10
** Please see attached file for the problem information ** Use the information on the pages to provide a "fair price" for the securities.
1. For each of the scenarios below, explain whether or not it represents a diversifiable or an undiversifiable risk. Please consider the issues from the viewpoint of investors. Explain your reasoning a. There's a substantial unexpected increase in inflation. b. There's a major recession in the U.S. c. A major lawsuit is f
What are some reasons that capital asset acquisition decisions receive particular attention?
Mr. Doe started a new retail store by using some funds accumulated in the past. The value of Mr. Doeâ??s business can be stated to be equal to the present value of the free cash flow that the retail store will generate in the future. To find out the present value of free cash flow, you need to find the discount rate (required
First, the cost of equity is often used in valuing the stocks of a company. Second, CAPM is stated as follows: Rj - RF = ?j [RM - RF] or Rj = RF + ?j [RM - RF] Rj = expected required rate of return of an asset RF =risk free rate ?j = systematic risk of the asset vis-à-vis the market RM = expected required rate of return
1. What are the major valuation methods for financial assets? What projection should you make and what variables should you estimate? Please discuss the general valuation process 2. What was the true cause of the worst financial crisis the world has seen since the Great Depression? Please provide an analysis of the facto
Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt abd 75% equity; however, the CEO believes that the firm should use more debt. The risk free rate is 5%, the market risk premium is 6% and the firms tax rate is 40%. Currently, Cyclone's cost of equity is 14%, whichis determined by the CAPM. What would be Cyclone's cost of equity if it changed its capital structure to 50% debt and 50% equity?
Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt abd 75% equity; however, the CEO believes that the firm should use more debt. The risk free rate is 5%, the market risk premium is 6% and the firms tax rate is 40%. Currently, Cyclone's cost of equity
I need help on Q4. How much will Sarah (or any diversified investor) require/expect to earn on each stock (given its riskiness) in order to hold it? In other words, establish the risk-return relationship: build up the CAPM equation using the calculated portfolio risk impact of each stock relative to the market proxy (The Van
See attached files. Please answer each question thoroughly and show work for each problem. The answer is based on the following reference material: Course material: Financial Management: Concepts and Applications for Health Care Organizations 4th Ed. Bruce R. Neumann, PH.D, Jan P.Clement,PH.D., Jean C.Cooper,PH.D.
Return on Financial Assets Solve the following problems: 1. Consider the following four debt securities, which are identical in every characteristic except as noted: W: A corporate bond rated AAA X: A corporate bond rate BBB Y: A corporate bond rated AAA with a shorter time to maturity than bonds W and X Z: A corpo
Assignment: Using Yahoo! Finance find the value of beta for Verizon wireless. Discuss the following items: 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
What is the difference between an ordinary, capital, and Section 1231 asset? Why is this distinction important? What assets are subject to depreciation recapture? Compare and contrast Section 1245 and Section 1250 recapture.
Use the following information: Caledonia Minerals ($28Mil Assets) has an estimated beta of 1.6. The company is considering the acquisition of HogWild ($42 Mil assets) that has a beta of 1.2. Caledonia last paid a dividend of $1 per share 2010. In 2007, the Caledonia paid a dividend of $0.89. This dividend growth rate
Reynolds American Inc. (RAI) 1. Examine the capital structure of your firm, Reynolds American Inc. (RAI).Remember that the capital structure refers to outside claimants of the firm and is typically long-term in nature. Capital by definition does not include items like accounts payable, accrued liabilities, deferred compensat
The case which full name is "Northern Forest Products Case: Risk Adjusted Rate of Return and Divisional hurdle Rates" is attached below for your perusal.
1. You purchased 250 shares of common stock on margin for $25 per share. The initial margin is 65% and the stock pays no dividend. Your rate of return would be _____ if you sell the stock at $32 per share. Ignore interest on margin. a. 35% b. 39% c. 43% d. 28% 2. The assets of a mutual fund are $25 million. The liabilitie
1) Stocks A and B have the following distributions: State Probability of state Return on Stock A Return on Stock B Boom 30% 12% -2% Normal 60% 8% 2% Bust 10% 4% 6% a) Calculate each stock's expected return, standard deviation and coefficient of variation. b) Calculate the expected return, standard deviation and coefficien
I have been using Ross Stores, Inc. (ROST) for past projects. Basically it is asking to look at and calculate the: total risk, market risk, estimate the cost of equity, discounted cash flow model, bond yield plus risk premium, and do an analysis with a graph to show the results in Excel. You have been accumulating two seri
Booher Book Stores has a beta of 0.8. The yield on a 3-month T-bill is 4% and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM?
See attached files. Please Explain How to obtain Results Step by Step a. Find the monthly holding period returns for the period 1 January 2009 - 31 December 2009 for Quarry Products, BJs Export and the market (MKT) as proxied by the All Ordinaries index (find data attached). The monthly holding period return is the retur
Please help with the following problem. Provide step by step calculations. Suppose FPL will pay an annual dividend of $2.48 in 1994, and assume the market risk premium (RM - Rf) is 7.5% and the risk free interest rate is 7.3% (the current yield on 30-year T-bonds from Exhibit 8), and FPL Group Inc. stock is selling at $34 pe
Where did the Jensen Measure come from and why is it not commonly used?
Medical Associates is a large for-profit group practice. Its dividends are expected to grow at a constant rate of 7% per year into the foreseeable future. The firm's last dividend (D0) was $2, and its current stock price is $23. The firm's beta coefficient is 1.6; the rate of return on 20-year T-bonds currently is 9%; the exp
In a table, briefly summarize and compare what Sharp, Treynor and Jensen measures, their strengths, weaknesses, and how would you personally utilize and monitor them for a portfolio you are responsible for managing.