Solution-Compute the market and xyz excess

Compute the market and xyz excess

Assignment Help Finance Basics

Reference no: EM133060814

You need to estimate the equity cost of capital for XYZ Corp. You have the following data available regarding past returns: Year Risk-free Return Market Retum XYZ Retum 2007 3% 6% 10% 2008 1% -37% -45% a. What was XYZ's average historical return? b. Compute the market's and XYZ's excess returns for each year. Estimate XYZ's beta. c. Estimate XYZ's historical alpha. d. Suppose the current risk-free rate is 3%, and you expect the market's return to be 8%. Use the CAPM to estimate an expected return for XYZ Corp.'s stock. e. Would you base your estimate of XYZ's equity cost of capital on your answer in part (a) or in part (d)? How does your answer to part (c) affect your estimate? Explain.

Reference no: EM133060814

Questions Cloud

Cash flow pattern at the end of year five : You have been offered the opportunity to invest in a project that will pay $4645 per year at the end of years one through three and $8061 per year at the end of

Expected value of the office building : There is a 30% probability that an office building will be sold after five years for $30 million, a 50% probability that it will be sold for $20 million and a 2

European put option using a binomial tree : In answering this question, it may be helpful to use the spreadsheet call.xls (which has been available on moodle for weeks). call.xls gives the Binomial price

Educational makeup of the Texas Legislature : What are some of the past and more recent barriers to voting in Texas? Discuss the gender, racial and educational makeup of the Texas Legislature.

Compute the market and xyz excess : You need to estimate the equity cost of capital for XYZ Corp. You have the following data available regarding past returns: Year Risk-free Return Market Retum X

Determining the opening price : The board of directors of Moon Pty Ltd announced a quarterly dividend of $0.25 The ex-dividend date is February 3. On November 2 the company's share closed at $

Calculate the price of shares after the bonus : Hitech company has outlined its investment opportunities over the next 5-year window. The company has currently issued 2,500,000 million ordinary equity shares.

Context of political economy and international development : We explore the broader topic of globalization within the context of political economy and international development.

Different types of investment vehicles : Assume you just inherited $100,000. How would you invest it? Keep in mind that there are many different types of investment vehicles and many different types of

User Account

All Pages

Compute the market and xyz excess

Reference no: EM133060814

Reference no: EM133060814

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT