Bob's Beer Garden sells very expensive luxury beer and when the market is doing well, stock traders will come to Bob's and buy his expensive beer in large quantities, but when the market is doing badly, Bob can't sell any beer. Bob's Beer Garden went public a few years ago, what would you estimate the Beta is? a) Less than 1 b) 1 c) Greater than 1
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Bob's Beer Garden sells very expensive luxury beer and when the market is doing well, stock traders will come to Bob's and buy his expensive beer in large quantities, but when the market is doing badly, Bob can't sell any beer. Bob's Beer Garden went public a few years ago, what would you estimate the Beta is?
a) Less than 1
b) 1
c) Greater than 1
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- About market efficiency, which of the following statements is right:a. In a highly efficient stock market, it is almost impossible for an investor to make profit from the stock market.b. In a highly efficient stock market, some smart investors can definitely beat the market even without the inside information. c. An investor can make profit by buying the stock of free Inc. since it just reported that the half-year profit doubled with respect to that during the same period in the last year. d. The stock prices of big companies are closer to their intrinsic values than those of small companies since more people follow those big companies, whereas few people follow those small companies.An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of $30,000. If the economy grows at a moderate pace, the investment will result in a profit of $20,000. However, if the economy goes into recession, the investment will result in a loss of $30,000. You contact an economist who believes there is a 20% probability the economy will remain strong, a 70% probability the economy will grow at a moderate pace, and a 10% probability the economy will slip into recession. What is the expected profit from this investment?A private firm with investment in many industries is considering investing in the fast-food industry. Looking at data on publicly traded fast food companies, an analyst discovers the following information for McDonald’s and Wendy’s International. Equity beta D/E McDonald’s 0.90 0.60 Wendy’s 0.70 0.45 In addition, the analyst has the following information from financial markets: 1. The risk-free rate of interest is 3%. 2. The market risk premium is 6%. 3. The corporate tax rate is 20% for all firms. 4. The project will be financed with 40% debt and 60% equity. 5. The private company can borrow long-term debt at 6% interest. Calculate the discount rate for an investment in the fast-food business. (
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