What are the steps in calculating the Asset beta in the CAPM for purposes of calculating the cost of capital for a project?
Estimate the cost of equity, WACC, and unlevered cost of equity. Using Target as the company you have been studying thus far. Find the beta for your company use: http://finance.yahoo.com/q/ks?s=AIG Estimate your company's cost of equity. Estimate your company's weighted-average cost of capital. Estimate your compan
I used IBM as my discussion company to explain beta so far I have come up with this... Beta is a measure of stock price fluctuation, as compared to an "average" company. If a particular stock has a high beta, that means the price fluctuates. Raising capital equity will be based on seeking out those ventures who thrive on roll
Question 1: The return on the stock market as a whole is currently 9.3%. Short dated Treasury bills are currently yielding 4.12%. The Beta factor applied to returns from companies involved in the sector in which the company is considering investment projects is 1.28. Applying the Capital Asset Pricing Model (CAPM) determin
A company wants to invest excess cash in 1-month, 3-month and 6-month Certificates of Deposit (CDs). The company has expected uses of cash in the next 6 months, and it wants to make sure that the principal and interest from maturing CDs meet the requirements for cash plus a safety margin for each month. For simplicity we assum
How would the cost of capital change if the capital structure changed. If the company needs a split of 25% debt to 75% equity to have an optimal capital structure, would that be optimal. What would happen to the cost of capital if it is not optimal and the firm moves to optimal.
Please provide concise answers in 4 to 5 sentences for the following questions. 1) Would you ever use CAPM to make personal investment decisions? 2) What is your personal discount rate or rate of preferences? i.e. how much would you pay for a promise of $1000 to be received one year from now? Would you discount it by 10%,
What options are available to organizations for raising capital? How do different capital markets affect the cost of capital to an organization?
1) if these are the only two investments in her portfolio, what is her portfolio's beta? 2) If the market required rate of return is 14 percent and the risk-free rate is 6 percent, what is the fund's required rate of return? 3) Use a spreadsheet or calculator with a linear regression function to determine stock X's beta coefficient. Plot the security market line. 4) Construct a scatter diagram showing the relationship between returns on stock Y and the market. Use a spreadsheet or a calculator with a linear regression function to estimate beta.
1. An individual has $35,000 invested in a stock which has a beta of 0.8 and $40,000 invested in a stock with a beta of 1.4, if these are the only two investments in her portfolio, what is her portfolio's beta? 2. Suppose you are the money manager of a $4 million investment fund. The fund consists of 4 stocks with the follo
1. The Heuser Company's currently outstanding 10 percent coupon bonds have a yield to maturity of 12 percent. Heuser believes it could issue at par new bonds that would provide a similar yield to maturity. If its marginal tax rate is 35 percent, what is Heuser's after tax cost of debt? 2. The earnings, dividends, and stock pr
A US manufacturing organization is planning to extend operations into Canada. I am needing help conducting a sensitivity analysis, based on the following "what if" scenarios: 1. What if funds are blocked? How does this affect the parent company? 2. From the perspective of the subsidiary, what if the subsidiary provided th
1. Which of the following could explain why a business might choose to organize as a corporation rather than as a sole proprietorship or a partnership? a. Corporations generally face fewer regulations. b. Corporations generally face lower taxes. c. Corporations generally find it easier to raise capital. d. Corporations enj
Summarize the different capital structure concepts addressed by answering the following questions: Why is WACC important to an organization? What impact does WACC have on capital budgeting and structure?
Suppose the expected return on the market portfolio is 14.7 percent and the risk-free rate it 4.9 percent. Morrow Inc. stock has a beta of 1.3 Assume the capital-asset-pricing model holds. What is the expected return on Morrow's stock? If the risk-free decreases to 4 percent, what is the expected return on Morrow's sto
Security Market Line, Mean variance criteria, Portfolio return, Portfolio beta, Portfolio standard deviation, Beta of stock, mean-variance criteria, dominance, SML,
1) Consider the following three investments: Security Expected return Standard deviation J 0.12 0.4 K 0.14 0.4 L 0.13 0.5 M 0.12 0.3 Using the mean-variance criteria, identify whether one security dominates or whether there is no dominance for each pssible pair of securities 2) Tor Johnson has identified the f
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 22 percent and a standard deviation of 5 percent. The risk-free rate is 4.9 percent, and the expected return on the market portfolio is 19 percent. Assume the capital-asset-pricing model holds. Question: What expected rate of
Suppose you have invested $50,000 in the following four stocks: Security Amount Invested Beta Stock A $10,000 0.7 Stock B 15,000 1.2 Stock C 12,000 1.4 Stock D 13,000 1.9 The risk-free rate is 5 percent and the expected return on the market portfolio is 18 percent.
Directions: Choose the correct answer by highlighting the answer with yellow marker from the MS Word program (You can also use a separate sheet, but make sure to number your answers clearly). There are 20 multiple choice questions. Chapter 6 (Brealey et al) 1. The dividend discounted cash-flow model states that today's
Week 6 - problem 4 Suppose you have invested $50,000 in the following four stocks: Security Amount Invested Beta Stock A $10,000 0.7 Stock B 15,000 1.2 Stock C 12,000 1.4 Stock D 13,000 1.9 The risk-free rate is 5 percent and the expec
A stock has a beta of 1.05 and an expected return of 19 percent. A risk-free asset currently earns 5.7 percent. a. The expected return on a portfolio that is equally invested in the two assets is _______%. (Input answer as a percent rounded to 2 decimal places, without the percent sign.) b. If a portfolio of the two asse
1. Suppose the expected returns and standard deviations of stocks A and B are E (RA) = 0.15, E (RB) = 0.25, sA = 0.1, and sB = 0.2, respectively. Calculate the expected return and standard deviation of a portfolio that is composed of 40 percent A and 60 percent B when the correlation between the returns on A and B is 0.5. Cal
Can you please assist me with these questions - 1. Stock Betas - A stock has an expected return of 12.5%, the risk-free rate is 5%, and the market risk premium is 6%. What must the beta of this stock be? 8. Expected Returns - A stock has a beta of .7, the expected return on the market is 15%, and the risk-free rate is 6.5
Please detail calculations so that they can be posted into an excel spreadsheet and please explain how the calculations were devised. Suppose you have invested $ 50,000 in the following four stocks: Security Amount Invested Beta Stock A 10,000 0.7 Stock B 15,000 1.2
"The study level of Other is Master." Let's suppose I am a Martian who has just landed outside your dwelling, one morning. I notice a newspaper in the yard open to the financial section and there is a reference to stocks and betas. How would attempt to explain to one very friendly Martian (who will do you no harm), what bet
Louisiana Enterprises, an all-equity firm, is considering a new capital investment. Analysis has indicated that the proposed investment has a beta of 0.5 and will generate an expected return of 7 percent. The firm currently has a required return of 10.75 percent and a beta of 1.25. The investment, if undertaken, will double the
Hello BrainMass OTA, Q 1. The earnings, dividends, and stock price of Carpetto Technologies Inc. are expected to grow at 7 percent per year into the future. Carpetto's common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the current year. a. Using t
You are given the following data: (1) The risk-free rate is 5 percent. (2) The required return on the market is 8 percent. (3) The expected growth rate for the firm is 4 percent. (4) The last dividend paid was $0.80 per share. (5) Beta is 1.3. Now assume the following changes occur: (1) The inflation premium drops
On March 1, 2001, the Australian Coal Exploration Company was investigating the feasibility of two mutually exclusive investment projects. The first prospective investment involved a strip (open-cut) mining operation in western New South Wales. The second investment also involved the extraction of coal, but this expenditure woul
A) What is the price of a 10-year US Treasury STRIP that makes a single payment of $10,000 if the discount rate is 5% effective annual yield? b) Alpha Company. has just issued a traditional 3 year 6% coupon bond that makes coupon payments twice a year at a price of 97. What is the yield to maturity on the bond? c) Beta
I need help in assessing Proctor & Gamble in respect to the Wella merger. Also need to describe a series of optimal financial strategies for P&G if any financil theories relate to this (i.e Capital Structure M&M; Portfolio Theory; CAPM etc) show relation...This should also show an evaluation of the company's financial performanc