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You have observed the following returns over time:
Year Stock X Stock Y Market 2006 14% 13% 12% 2007 19 7 10 2008 16 5 12 2009 3 1 1 2010 20 11 15 Assume that the risk free rate is 6% and the market risk premium is 5%
a. what are the betas of stocks X and Y
b. What are the required rates of return on stocks X and Y
c. What is the required rate of return on a portfolio consisting of 80% of stock X and 20% of stock Y If stock X's expected return is 22%, is stock X under or overvalued?
Draw a graph showing how the expected return varies with beta, what is the market risk premium and what is the required rate of return on an investment with a beta of 1.5?
Stock valuation method uses discounted cash flows theory to compute the theoretical value of a stock. The most popular academic method is dividend growth model.
Two people agree on the riskiness of a stock, they also agree on expected value of D1 & on expected future dividend growth rate. One person normally holds stocks for two years,
Jo Company reports the following on Dec 31. 2009, he has a bank loan with a covenant needing a working capital ratio of at least three (3) to one (1).
Which projects would you suggest that Fairfield act upon if no capital rationing and what is the optimal capital budget ANDtaking into consideration the $11 million capital rationing which projects would suggest Fairfield act upon?
How many orders will be placed during the year and what will the average inventory be - what is the total cost of ordering and carrying inventory?
Helen recently get a credit card with a nominal interest rate of 21%. With the help of card, she buy some new clothes for 250 dollar. The minimum payment on the card is only 20 dollar every month.
Evaluate what is the difference in their savings account balances at the end of thirty years?
What is the amount to use as the annual sales figure when evaluating this project- Variable costs are 55 percent of sales, depreciation on the equipment to produce the new board will be $1,350,000 per year, and fixed costs are $1,250,000 ..
what are the substantive procedures using generalized audit software to audit.
Determine the three forms of business organization, & explain the advantages and disadvantages of each form? For a corporation, discuss the overall goal of the financial manager?
In December 1988, equipment worth $6700, including a computer priced at $3000, was purchased for cash. William paid an additional $1000 for a computer software package to be used by the company.
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