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# The Capital Asset Pricing Model (CAPM)

### Cost of common equity using CAPM - Booher Book Stores

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?

### Quarry Products: Beta, Market premium, CAPM, SML and plot results.

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

### Booher Book Stores: What is the estimated cost of common equity using CAPM?

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%, but the stock market return in the previous years was 15%. What is the estimated cost of common equity using the CAPM?

### Calculate expected capital gains yield of FPL stock using CAPM

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

### How should a toy company determine its cost of equity?

A toy company is considering developing and distributing a new board game for children. The project is similar in risk to the firms current operations. The firm maintains a debt equity ratio of 0.40 and retains all profits to fund the firms rapid growth. How should the firm determine its cost of equity? a. by adding the mark

### Where did the Jensen Measure come from and why is it not commonly used?

Where did the Jensen Measure come from and why is it not commonly used?

### Medical Associates: Calculate cost of equity using DCF, CAPM

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

### US Treasury Bonds please use the current values found at the websites provided: need help getting started thanks

By walking you through a set of financial data for IBM, this assignment will help you better understand how theoretical stock prices are calculated; and how prices may react to market forces such as risk and interest rates. You will use both the CAPM (Capital Asset Pricing Model) and the Constant Growth Model (CGM) to arrive at

### Expected Return Volatility Beta: Determine which stocks should be bought or sold

2. Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers but it does change the expected return of the following stocks: Expected Return Volatility Beta Gre

### National Rent A Center: Calculate cost of equity

National Renta Center has a beta of \$1.38 a stock price of \$19. and recently paid an annual dividend of \$0.94 a share. The dividend growth rate is 4.5 percent. The market has a 10.6 percent rate of return and a risk premium of 7.5 percent. What is the firm's cost of equity. 1. 7.05 percent 2. 8.67 percent 3. 9.13 percent

### Measuring Strengths, and Weaknesses in Managing a Portfolio

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.

### Calculate the Required Rate of Return and Stock Price for IBM Stock using CAPM and CGM

By walking you through a set of financial data for IBM, this assignment will help you better understand how theoretical stock prices are calculated; and how prices may react to market forces such as risk and interest rates. You will use both the CAPM (Capital Asset Pricing Model) and the Constant Growth Model (CGM) to arrive at

### Finance Capital Valuation - Caterpillar

I have to write a paper in which I justify the current market price of the organization's debt and equity using the various capital valuation models. Be sure to show all calculations that support your findings, including those involving rates of return. In addition, defend which valuation model best supports your findings. Be su

### Estimate discount rate for Target Corp: which if three models is accurate and realistic?

Use of the dividend growth, capm and apt. How accurate are these three models and how realistic are the assumptions of the three models. Which is the best one to estimate the discount rate for Target Corp.

### Financial Management Research Paper for Wal-Mart

This paper needs to contain the following guidelines: 1) A brief discussion of the firm to include its principle goods and services, market share, geographic locations where it operates and major competitors. 2) Evaluate the firm's financial condition and strategies. This will include the firm's weighted average cost of ca

### Finance: Analyzing IBM's Stock Price Using Ratios

** Please see the attached file for the complete problem description ** By walking you through a set of financial data for IBM, this assignment will help you better understand how theoretical stock prices are calculated; and how prices may react to market forces such as risk and interest rates. You will use both the CAPM (Cap

### Need your help with this questions

I have solutions that I am not sure if it is correct because it lacks the explanation to arrive at this answer can you please assist me with this I am attaching the question doc. and the answers .xls thanks in advance for your help you are a great tutor!

### Required Return for UK Stock

Please help me with the given problem for an assignment Module 7 Assignment 2 Project 1 Cost of Capital Comparison ? 1 The International Security Market Line of the International Capital asset pricing model (CAPM) without proper currency hedging is E = R + [E1 - R] * B + sigma (CRP * alpha). Where: - E = Required r

### Financial data for IBM

By walking you through a set of financial data for IBM, this assignment will help you better understand how theoretical stock prices are calculated; and how prices may react to market forces such as risk and interest rates. You will use both the CAPM (Capital Asset Pricing Model) and the Constant Growth Model (CGM) to arrive at

### The Capital Asset Pricing Model: Merck & Co.

Using the PC Quote Web Page find the beta for Merck & Co. Inc. 2 page, double space. a. What is Merck's estimated beta coefficient? b. Use the CAPM equation in order to find out what is the present 'cost of equity' of Merck? Explain the meaning of the 'cost of equity'. c. Choose two other companies. If you invest 1/3

### Cost of Retained Earnings: Penn Trucking

The risk free rate of return is 3% and the market risk premium is 12%. Penn Trucking has a beta of 1.8 an a standard deviation of returns of 24 %. Penn Trucking's marginal tax rate is 40%. Analyst expect Penn Trucking's dividends to grow by 5% per year for the foreseeable future. Using the capital asset pricing model, what is Pe

### Find an estimate of the risk-free rate of interest, krf.

By walking you through a set of financial data for IBM, this assignment will help you better understand how theoretical stock prices are calculated; and how prices may react to market forces such as risk and interest rates. You will use both the CAPM (Capital Asset Pricing Model) and the Constant Growth Model (CGM) to arrive at

### Capital Asset Pricing Model of Boeing Co.

What is the estimated beta coefficient of Boeing Co? a. What is the estimated beta coefficient of Boeing Co? What does this beta mean in terms of your choice to include Boeing in your overall portfolio? b. Given the beta of Boeing Co, the present yield to maturity on U.S. government bonds maturing in one year (currently

### Capital Asset Pricing Model

What is the estimated beta coefficient of Boeing Co? a. What is the estimated beta coefficient of Raytheon? What does this beta mean in terms of your choice to include Raytheon in your overall portfolio? b. Given the beta of Boeing Co, the present yield to maturity on U.S. government bonds maturing in one year (currently

### What is the required rate of return on Kohers' stock?

The real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, the market risk premium is 4.70%, and Kohers Enterprises has a beta of 1.10. What is the required rate of return on Kohers' stock?

### CAPM , DGM, and Required Return: Sam and Sally Vallarta have a portfolio...

I don't know where to start with each calculation with the information given for each investment. If I know where to put the numbers, I can figure it out, with step by step directions. I need these done correctly so I can work the rest of the problems: which is weighted average expected rate, expected standard deviation, and cor

### Capital Asset Pricing Model- expected return, volatility

2. Your investment portfolio consists of \$15, 000 invested in only one stock-Microsoft. Suppose the risk free rate is 5%, Microsoft stock has an expected return of 12% and a volatility of 40%, and the market portfolio has an expected return of 10% and a volatility of 18%. Under the CAPM assumptions, a. What alternative i

### Capital Asset Pricing Model: Microsoft and John & Johnson

See attached file.

### Finance: Uma Corporation project analysis. Should the firm undertake the project?

See attached file. At the end of 2005, Uma Corporation was considering undertaking a major long-term project in an effort to remain competitive in its industry. The production and sales departments determined the potential annual cash flow savings that could accrue to he firm if it acts soon. Specifically, they estimat

### Beta of a Bistro, GE and Ford

The tendency of a stock's price to move up and down with the market is reflected in its beta coefficient. Therefore, beta is a measure of an investment's market risk, and is a key element of the CAPM. In this exercise, you get financial information using Yahoo!Finance (found at http://finance.yahoo.com). To find a company's