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What the capital asset pricing model of each stock

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Reference no: EM133187702

Question - Private Limited is an all equity financed company with a cost of capital of 18.5% per annum. The firm faces a risk-free rate of return of 8% per annum and an expected average market portfolio return of 15% per annum.  It is considering the following stocks available on the domestic financial market of operation:

Stock

Projected funds to be invested in the stock ($000)

Expected Market  Value of the Stock in 1 Year ($000)

Beta Coefficient

A

1000

1095

0.20

B

1000

1115

0.40

C

1500

1780

1.00

D

2000

2385

1.50

E

2000

2400

2.00

Required -

a) What the firm's beta co-efficient and interpret it.

b) What the capital asset pricing model (CAPM) of each stock?

c) What the expected rate of return for each stock?

d) What the over, under and correctly valued stocks?

Reference no: EM133187702

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