Equity cost of capital, Using the information, assume you

Equity cost of capital

Reference no: EM1352190

Stock Price/Share ($) Number of shares outstanding (millions)
A 10 10
B 20 12
C 8 3
D 50 1
E 45 20

1) Using the data, suppose you are holding a market portfolio and have invested $12,000 in Stock C.

a) How much have you invested in Stock A?
b) How many shares of Stock B do you hold?
c) If the price of Stock C suddenly drops to $4 per share, what trades you need to make to maintain a market portfolio?

2) Suppose the market portfolio has and expected return of 10% and a volatility of 20%, while Microsoft's stock has a volatility 30%.

a) Given its higher volatility, should we expect Microsoft to have and equity cost of capital that is higher that 10%?
b) What would have to be true for Microsoft's equity cost of capital to be equal to 10%?

Reference no: EM1352190

Questions Cloud

Explain an aspect of proctor and gamble''s marketing activity : Explain an aspect of Proctor & Gamble's marketing activity that you found particularly interesting or valuable Or compare the activities of P&G with those of Harley Davidson or Lady Gaga in terms of marketing innovation.

Rewards system and employee needs assessment : Determine alternative reward systems in the context of employee needs. Select the best one and justify your shoice based on the employee' values and expectations.

Proxemics in countries : How do proxemics in other countries compare with proxemicsin the U.S.? Are there regional differences within America regarding the acceptable distances maintained between people?

Illustrate what has happened in the market for your good : Illustrate what has happened in the market for your good or service in the curve you labeled D1. What happened to the equilibrium price.

Equity cost of capital : Using the information, assume you are holding a market portfolio and have invested $12,000 in Stock C.

Involved in interorganizational relationships : Explain why do organizations become involved in interorganizational relationships

Design architecture of system to accept natural language : Using the generic model of a language processing system presented here, design the architecture of a system that accepts natural language commands and translates.

What is the angle q and tension in the string : A 5.00 X 10-2 kg mass with a charge of +0.75 mC is hung by a thin insulated thread. A charge of -0.9 mC is held 0.15 meters directly to right so that the thread makes an angle q with the vertical. What is the angle q and the tension in the string.

Meaning of cultural empathy : Explain what "cultural empathy" means to you? Can we really know the inner experiences of clients? How has this course prepared you to deal with cultural diversity in your chosen area of counselling practice?

User Account

All Pages