Beauty Ltd And Ugly Ltd Overall Performance

1200 Words5 Pages
From the two given companies, Beauty ltd and Ugly ltd overall performance, we can see that the both companies are performing well. But by evaluating the performance of company, the company Ugly is in better position as per the investor’s point of view. As the standard deviation of Beauty company is 0.02 and Ugly ltd has 0.07 which is much higher than market rate, 0.01. The company Ugly has higher standard deviation than market rate. Along with this, the calculation of Beta for Beauty Company is 0.051 and Ugly is 0.05 the beta portfolio is 0.11.the capital assets pricing model for beauty co and Ugly company is 48% and 55% respectively. The weighted average cost of capital for Beauty ltd is 60% and 63%. The company with high…show more content…
The capital assets pricing model gives the information about the relationship between risk and expected return the investors can received. The Ugly limited has highest amount 55% which means that investors can receive high return from investing in Ugly Company. The cost of capital of Ugly Company is 3% higher than beauty ltd. Along with 55 debts and 45 equity, the cost of capital is 3% higher in Ugly. Based on the calculation, from both the company, Ugly Company is more profitable as per the investor’s point of view. The company is less risky in the market than Beauty Company and at the same time the rate of return is also much higher than other company. So, the investor can earn more return on investment. The main factors which influence the investors to invest their money in particular company which is less risky projects in the business along less fluctuating the market price or share price of the company. In addition to this, the opportunity to get higher and stable return in the market also plays an important part in attracting the potential stakeholders to invest in company in order to get higher return. Based on the calculation, Ugly company will able to give return on investment which is 6% higher than Beauty Company and at the same time it is less risky in the market. With the same proportion of equity and debt in the both company,
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