Determine the required rate of return on kci stock

Assignment Help Business Management
Reference no: EM131093284

As manager of the MSU Endowment Fund, you have been asked toevaluate a specific stock: Kampwerth Campers, Inc. (symbol KCI). You are consideringa $200,000 investment in KCI stock. You need to assess the riskiness of KCI. The standarddeviation for KCI returns is 21.25%. The standard deviation for the market is 15%. Thecorrelation between KCI and the market is 0.60. The rate of return on a risk free securityis 3%. The expected return on the market is 10%.

a. Using the Capital Asset Pricing Model, determine the required rate of return on KCIstock.

b. Comment on the riskiness of KCI compared to the market.

c. Assume the market is expected to fall by 5% next period. If you purchase $200,000 ofKCI before the market decline, what is the dollar impact that you anticipate this marketdecline will have on KCI stock?

Reference no: EM131093284

Questions Cloud

Identify the following costs as direct materials : 1. Identify the following costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for an automobile manufacturer. Also, identify each costs as either a prime costs (P), conversion costs (C) or both (B). Also please list if e..
Heavy construction projects : As a financial analyst for National Engineering, you are required to estimate the cost of capital the firm should use in evaluating its heavy construction projects. The firm's balance sheet data and other information are listed below. Assume a 35%..
Mean-variance preferences and utility function : FundY:E[rY]=34%,σY =40% You have mean-variance preferences and utility function:
Implement c program for evaluating the polynomial : Implement C program for evaluating the polynomial f(x)= a 4 x 4 +a 3 x 3 +a 2 x 2+ a 1 x 1 +a 0 for a given value of x and its coefficient using Horner's method.
Determine the required rate of return on kci stock : a. Using the Capital Asset Pricing Model, determine the required rate of return on KCIstock. b. Comment on the riskiness of KCI compared to the market.
Compute the future value : FutureValue Compute the future value in year 9 of a $2,000 deposit in year 1 and another $1,500 deposit at the end of year 3 using a 10 percent interest rate.
Give an example of activity-based costing methods : Give an example of activity-based costing methods by creating a fictitious company. Include a cost analysis. Discuss the 2-3 advantages of the ABC method.
Find the moment of inertia : MOMENT OF INERTIA Q1.Find the moment of inertia of given figure about centroidal axes. IXX=12848.98mm4,IYY=13343.72mm4
What is the intended purpose of the federal gift tax : What is the intended purpose of the Federal gift tax? Hilda, a U.S. citizen, has established her residence in Costa Rica in order to avoid the U.S. estate tax. Comment on the value of Hilda's planning.

Reviews

Write a Review

Business Management Questions & Answers

  Normal 0 false false false en-in x-none

normal 0 false false false en-in x-none x-none

  Explain in the e-activity worked more hours than allowed

Employees at Foxconn factories explain in the e-Activity worked more hours than allowed under Chinese labor laws.

  Elucidate how would you advise him

At American Heartland, we hire only American citizens. Jose is considering suing under Title VII. Elucidate how would you advise him.

  Go about implementing such a decision

If Mueller decided to invest in production operations in China, how should they go about implementing such a decision?

  Mcrs system basis over the project

Foley Systems is considering a new investment whose data are shown below.  The equipment would be depreciated using the MCRS system basis over the project's 4-year life, would have a zero salvage value, and would require some additional working ca..

  Calculate bep and total profit

What is the Break Even Point to cover costs and the $1,000 profit and what will the total profit be if sales are 4,500 units as forecasted by marketing?

  James has a prize race horse

James has a prize race horse named Mr. Ed.   James is in desperate need of some quick cash so he goes to a wealthy local horse trainer to see if he can borrow $50,000 from him.  The wealthy horse trainer agrees to loan the $50,000 to James, but wants..

  The ethics related issues

Considering Lockheed's past and some of the ethics related issues they (and other defense contractors) experienced in past decades, identify and describe what you consider to be some of the key turning points in the organization that ultimately led t..

  Describe the negotiation you observed or participated in

The purpose of this assignment is to highlight the importance of listening and responding in negotiations and to identify ways to improve listening and speaking in various negotiation situations. Describe the negotiation you observed or participate..

  Comment on three organizational stakeholders

1. Identify and comment on three organizational stakeholders. 2. Give five arguments for and five against a company being socially responsible.

  Standardizing employee selection programs

Suppose you are the Sales Manager for Technocrat Gizmos, and your section is in desperate need of new Sales Associates. You post a job description in a local newspaper

  Find an organization or brand that has suffered an image

find an organization or brand that has suffered an image impact and how has the organization responded? was it

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd