Difference in required returns for HRI and LRI

Assignment Help Financial Management
Reference no: EM131867863

HR Industries (HRI) has a beta of 1.6, while LR Industries' (LRI) beta is 0.4. The risk-free rate is 6%, and the required rate of return on an average stock is 13%. The expected rate of inflation built into rRF falls by 1.5 percentage points, the real risk-free rate remains constant, the required return on the market falls to 10.5%, and all betas remain constant. After all of these changes, what will be the difference in the required returns for HRI and LRI?

Round your answer to two decimal places.____ %

Reference no: EM131867863

Questions Cloud

Investor obtained fully amortizing mortgage five years : An investor obtained a fully amortizing mortgage five years ago for $105,000 at 12% for 30 years.
The efficient market hypothesis is interpreted in weak form : The efficient market hypothesis is interpreted in a weak form, a semi-strong form and a strong form.
Valuation and qualifying accounts schedule be analyzed : Why should the allowance for doubtful accounts and the valuation and qualifying accounts schedule be analyzed?
What was the average real risk premium : What was the average real risk-free rate over this time period? What was the average real risk premium?
Difference in required returns for HRI and LRI : After all of these changes, what will be the difference in the required returns for HRI and LRI?
Cash flows related to the acquisition of the dishwasher : What are the cash flows related to the acquisition of the dishwasher? What are the cash flows related to the disposition of the dishwasher?
How much should you be willing to pay for this bond today : Assume that you are considering the purchase of a $1,000 par value bond. How much should you be willing to pay for this bond today?
The tax consequences related to the assets purchase : Without performing any calculations, describe the tax consequences related to the assets purchase, depreciation, and sale.
Determine the minimum required accounting average return : How do we determine the minimum required accounting average return (AAR)?

Reviews

Write a Review

Financial Management Questions & Answers

  Coupon yield-current yield and yield to maturity

Demonstrate that you understand the difference among coupon yield, current yield, and yield to maturity with the following illustration for Morgan Stanley debt, par value of $1000: current price of $1032, coupon rate of 4.2%, issue date of September ..

  From the books of agarwal from books of aggarwal bors

from books of aggarwal bors following information has been extracted rs. sales 240000 variable costs 144000 fixed costs

  What is the amount of net capital spending for the year

The financial statement of Edgewater marina reflect depreciation expense of $21600 and interest expenses of $27900 for the year .the current assets increased by$31800 and the net fixed assets increased by $28600. what is the amount of net capital spe..

  What was the flotation cost as a percentage of funds raised

The Collins Co. has just gone public. Under a firm commitment agreement, Collins received $33.00 for each of the 4.20 million shares sold. The initial offering price was $35.40 per share, and the stock rose to $43.00 per share in the first few minute..

  Random price movements indicate

Random price movements indicate A. irrational markets B. that prices cannot equal fundamental values C.

  Semi-annual coupon and are currently selling

The company has 60,000 bonds with a 30-year life outstanding, with 15 years until maturity. The bonds carry a 9 percent semi-annual coupon, and are currently selling for $870.73. What is the current value?

  What are the expected earnings per share

Security Analysts that have evaluated Concordia Corporation, have determined that there is a 15% chance that the firm will generate earnings per share of $2.40; a 60% probability that the firm will generate earnings per share of $3.10; and a 25% prob..

  Compute the future value in a year

Compute the future value in a year 9 of a $2,000 deposit in year 1 and another $1,500 deposit a the end of year 3 using a 10 percent interest rate.

  Lease that is a contractual obligation for the lessee

A lease that is a contractual obligation for the lessee

  Under two-year contract for certain computer services

The Waterford Clinic pays a flat monthly fee of $250 under a two-year contract for certain computer services.

  Describe the ethical issues- intended audience members

Describe the ethical issues that Ellen faces because of the ages of her intended audience members.

  What is the current share price

Apocalyptica Corporation is expected to pay the following dividends over the next four years: $5.70, $16.70, $21.70, and $3.50. Afterwards, the company pledges to maintain a constant 5.50 percent growth rate in dividends, forever. If the required ret..

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