Estimate a market beta for the project

Reference no: EM131936865

Question: Assume that Evergreen Healthcare, a provider of skilled nursing facility services, is evaluating the feasibility of building a new facility to replace one of its aging facilities in a small, low-volume market. The company's analysts estimate a market beta for the project of 0.8, which is somewhat lower than the 0.91 market beta of the company's average project. The corporate beta for the project is estimated to be 0.5. Financial forecasts for the new facility indicate an expected rate of return on the equity portion of the investment of 7%. If the risk-free rate, RF, is 2% and the required rate of return on the market, R(Rm), is 10%, is the new facility in the best interest of Evergreen's shareholders? Explain your answer.

Reference no: EM131936865

Questions Cloud

State the salient features of cray xts supercomputer : State in brief the salient features of Cray XTS supercomputer; draw a schematic diagram of the 2D torus system interconnect.

What was net income for the most recent four quarters : Assume you found the following stock quote for DRK Enterprises, Inc., at your favorite Web site. You also found that the stock paid an annual dividend of $.65.

How do enzymes regulate the rate of chemical change : How do enzymes regulate the rate of chemical change? How does the specificity of an enzyme depend on its structure?

List the advantages of using a stream processor : List the advantages of using a stream processor as against using ASIC(s) and FPGA(s) for a given application.

Estimate a market beta for the project : The company's analysts estimate a market beta for the project of 0.8, which is somewhat lower than the 0.91 market beta of the company's average project.

What is the dollar amount invested in stock b : You have invested $40, 134 portfolio in three securities. The three securities comprise of the risk-free asset, Stock A and Stock B.

What is the npv of investing today : What is the NPV of waiting and investing tomorrow? Verify that the hurdle rate rule of thumb gives the correct time to invest in this case.

Chemical equation for photosynthesis-cellular respiration : What is the overall chemical equation for photosynthesis and cellular respiration? How are they intimately tied to one another?

List three typical applications of stream processing : List three typical applications of stream processing, and the stated goals of the research project Merrimac at Stanford University.

User Account

All Pages