Estimate of the expected rate of return on the stock

Assignment Help Financial Management

Reference no: EM131464475

Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 2%, and IR 5.0%. A stock with a beta of 0.8 on IP and 0.4 on IR currently is expected to provide a rate of return of 11%. If industrial production actually grows by 5%, while the inflation rate turns out to be 6.0%, what is your revised estimate of the expected rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Revised expected rate of return %

Reference no: EM131464475

Questions Cloud

What is the expected stock price one year : What is the expected stock price one year from now just after next year's dividend is paid? (may ask for price today).

New company and currently has negative earnings : Twitterme, inc., is a new company and currently has negative earnings. The company's sales are $1.35 million and there are 130,000 shares outstanding.

What is the required return and what is the dividend yield : what is the required return? What is the dividend yield? What is the expected capital gains yield?

FARO Technologies-portable 3D measurement equipment : FARO Technologies, whose products include portable 3D measurement equipment, has 400 million shares outstanding trading at $5 a share.

Estimate of the expected rate of return on the stock : Suppose that two factors have been identified for the U.S. economy. what is your revised estimate of the expected rate of return on the stock?

What is operating leverage : What is operating leverage? How, if at all, is it similar to financial leverage?

Analysis of liquidity-profitability and productivity : analysis of (1) liquidity, (2) profitability, (3) productivity, and (4) debt management.

Minimum expected return from new capital investment project : Calculate the minimum expected return from the new capital investment project needed to satisfy The minimum expected rate= WACC Weighted Average Cost of capital

Compute new price of the bond : Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. Compute the new price of the bond.

User Account

All Pages