The risk-free rate and the expected market rate of return

Assignment Help Financial Management
Reference no: EM131354138

The risk-free rate and the expected market rate of return are 5% and 10% respectively. According to the Capital Asset Pricing Model (CAPM), the expected rate of return on security X with a beta 1.2 is equal to

Reference no: EM131354138

Questions Cloud

What would be an appropriate estimate of the stock price : A company is expected to pay a dividend of $1.1 per share one year from now and $1.78 in two years. You estimate the risk-free rate to be 3.8% per year and the expected market risk premium to be 5.3% per year. After year 2, you expect the dividend to..
What changes will occur on the company balance sheet : XYZ Ltd has Assets of $300,000,000, $30,000,000 of which is Cash. Debt is $100,000,000. If XYZ repurchases $10,000,000. How does it affect Equity? What changes will occur on the company’s balance sheet? What will its new leverage ratio be?
Explain on timeline the time cycle of a dividend : Explain on a timeline the time cycle of a dividend from announcement to payment. Be careful in labeling all days with the appropriate names. Also explain what happens to the stock price in the days of cum dividend and ex dividend.
What is the expected exchange rate one year : Assume $1 is currently equal to A$1.1024 in the spot market. Also assume the expected inflation rate in Australia is 2.8 percent as compared to 3.4 percent in the U.S. What is the expected exchange rate one year from now if relative purchasing power ..
The risk-free rate and the expected market rate of return : The risk-free rate and the expected market rate of return are 5% and 10% respectively. According to the Capital Asset Pricing Model (CAPM), the expected rate of return on security X with a beta 1.2 is equal to
What is the value of the option to expand : We are examining a new project. We expect to sell 6,400 units per year at $58 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $58 × 6,400 = $371,200. The relevant discount rate is 12 percent, and th..
What is the weighted average cost of capital for the firm : Your company is considering a direct investment project to produce computers in Thailand, for sale in the US market. This will be partially financed by US dollar debt, and partially financed by issuing stock in Thailand. What is the cost of equity ca..
What would be cost of equity from new common stock : P. Pravo Chocolate Co. expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 65%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $32.50 per share. New stock can be..
Calculate the average rate of return for each stock : Stock A and Stock B have the following historical returns: Year Stock A’s Returns, rA Stock B’s Returns, Calculate the average rate of return for each stock during the period 2008 – 2012.

Reviews

Write a Review

Financial Management Questions & Answers

  Compute the value of this stock with a required return

A firm is expected to pay a dividend of $2.45 next year and $2.60 the following year. Financial analysts believe the stock will be at their price target of $95 in two years. Compute the value of this stock with a required return of 12.4 percent.

  Annual sales of an energy saving device

It is estimated that the annual sales of an energy saving device will be 25,000 the first year and increase by 10,000 per year until 55,000 units are sold during the fourth year. In the fifth year and each year thereafter the sales will decrease by 5..

  Suppose an investment is estimated to have a cash flow

Suppose an investment is estimated to have a cash flow of $100,000 per year for the next five years. At the end of the fifth year the property is expected to be sold for $1,000,000. What is the present value of the investment at a 10 percent discount..

  Registered bond

A "registered bond" is one that shows the owner;' sname on the bond the owner's name is recorded by the issuer the owner's name is assigned to a bond serial number recorded by the issuer both a) and b), or c)

  To what extent is the procedure similar for valuation

Explain whether you agree or disagree with the following statement: "Unlike a dividend discount model, relative valuation seeks to explain the factors that determine the observed value of a share of common stock.

  How might immediate corrective action have been used

What type of control - feedforward, concurrent, or feedback - do you think would be most important in this situation and how might immediate corrective action have been used in this situation

  What must expected return on market be

A stock has an expected return of 13.5 percent, its beta is 1.15, and the risk-free rate is 4 percent. What must the expected return on the market be?

  How much must each savings deposit be

Today is Stanly's 55th birthday. He plans to retire on his 65th birthday. He wants to save the same amount each year, starting today and ending on the day he retires. Then, starting on his 66th birthday he wants to withdraw $10,000 each year ending o..

  Compute the percentage total return

Suppose a stock had an initial price of $ 72 per share, paid a dividend of $ 1.20 per share during the year, and had an ending share price of $ 79. Compute the percentage total return.

  What is the quick ratio

Galaxy United, Inc. 2009 Income Statement ($ in millions) Net sales $8,500 Less: Cost of goods sold 7,210 Less: Depreciation 400 Earnings before interest and taxes 890 Less: Interest paid 86 Taxable Income 804 Less: What is the quick ratio for 2009? ..

  In the basic valuation model risk

In the BASIC valuation model risk is generally incorporated into the___.

  Goals of the firm versus the personal goals of managers

Agency conflicts arise when there are differences in the goals of the firm versus the personal goals of managers. What qualitative considerations are important for the mitigation of agency conflicts in relation to the acceptance and completion of cap..

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