Lawsuit result has no direct impact on their operations

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Reference no: EM132054226

Suppose the CAPM holds and the stock of the firm APP Ltd. has a beta of 0.80. For simplicity, assume that the daily risk-free rate is 0%. April 1 May 1 June 1 Market Return -1% 2% 1% Beginning Market Capitalization of APP $100 Mil. $120 Mil. $120 Mil. (1) On Aprill, APP announces a LOSS ON A $10 million lawsuit against its main rival, SAM Ltd. After the announcement, the market consensus is that APP has a 50% chance of winning. What is your best guess of APP's stock return on this date? Assume the lawsuit's result has no direct impact on their operations.

Reference no: EM132054226

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