Newco stock using the capital asset pricing model

Assignment Help Financial Management
Reference no: EM131896645

In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate rate of return of an asset. Please use the CAPM model to solve the following problem.

Newco's beta is 1.3 Assume the expected return on the marketis 9.9% and the risk-free rate is 3%. What is the expected return on Newco's stock using the capital asset pricing model (CAPM)?

Reference no: EM131896645

Questions Cloud

What is the NPV of the book with the royalty payments : Bill Clinton reportedly was paid $15.0 million to write his book My Life. What is the NPV of the book with the royalty payments?
IRR rule advise regarding the payment arrangement : Smith's rate is $540 per hour and her opportunity cost of capital is 15% per year. What does the IRR rule advise regarding the payment arrangement?
Still negotiating the purchase price of the equipment : You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive NPV??
Regarding the bond swap and short-term trading opportunity : Regarding the short-term trading opportunity: Regarding the bond swap opportunity: What basic trading principle is involved in this situation?
Newco stock using the capital asset pricing model : What is the expected return on Newco's stock using the capital asset pricing model (CAPM)?
Project requires an upfront-what is the payback period : The project requires an upfront $1,000 investment, and promises to return $5,000 in 6 years. What is the payback period?
Economic integrations on international financial management : Analyze and discuss the impacts of globalization and economic integrations on international financial management.
What will be the change in the value of your firm : What does the NPV rule say you should? do If you take the contract, what will be the change in the value of your firm?
Compare with the stock actual expected return : How does this compare with the stock's actual expected return?

Reviews

Write a Review

Financial Management Questions & Answers

  Estimates of cash receipts and cash disbursements

The ABC Company has made the following monthly estimates of cash receipts and cash disbursements when preparing cash budgets for the next twelve months.

  What would be the expected difference in this? bond price

What would be the expected difference in this? bond's price immediately before and immediately after the next coupon? payment?

  What is the marginal tax rate and average tax rate

The Anberlin Co. had $294,000 in 2011 taxable income. Use the tax rates from Table 2.3. What is the average tax rate? What is the marginal tax rate?

  Comment on cooperatives treatment of the transaction

Please comment on the cooperative's treatment of the transaction

  Sustainable growth rate of sales in its forecasting

Do you think every company should have a sustainable growth rate of sales in its forecasting?

  Create the full amortization schedule

What is the total interest paid? Create the full amortization schedule. Stop the schedule with the month that has a beginning balance of zero,

  Estimate the minimum price the owner of the division

A sporting goods manufacturer has decided to expand into a related business. Management estimates that to build and staff a facility of the desired size and to attain capacity operations would cost 450 million in present value terms. Alternatively, t..

  Calculate tax credit on disposal

Reversing Rapids Co. purchases an asset for $193,512. Calculate tax credit on disposal.

  Calls with strikes are more valuable and puts

Calls with ____ strikes are more valuable and puts with ____ strikes are more valuable.

  About how the real interest rate will change

If the expected rate of inflation suddenly rises to 8.6%, what does Fisher’s theory say about how the real interest rate will change?

  How much is interest earned on interest

Consider a $3,000 deposit earning 9 percent interest per year for four years. How much is interest earned on interest?

  Small business owner visits his bank to ask for loan

A small business owner visits his bank to ask for a loan. how much would it be willing to lend the business owner?

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