If the firm’s beta is 1.75, the risk-free rate is 8%, and the average return on the market is 12%, what will be the firm’s cost of equity using the CAPM approach? Group of answer choices 15.00% 16.05% 14.27% 14.00%
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A: Given: Beta = 0.65 Market return = 11%= 0.11 Risk free rate = 4% = 0.04
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A: Risk free rate = 8% Market return = 12% Beta = 1..75
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If the firm’s beta is 1.75, the risk-free rate is 8%, and the average return on the market is 12%, what will be the firm’s
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16.05%
14.27%
14.00%
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- 21. Aluminum maker Alcoa has a beta of about 1.9, whereas Hormel Foods has a beta of 0.37. If the expected excess return of the market portfolio is 3%, which of these firms has a higher equity cost of capital, and how much higher is it? **round to two decimal places**Q1: a) Use the basic equation for the capital asset pricing model (CAPM) to Find the risk-free rate for a firm with a required return of 15% and a beta of 1.25 when the market return is 14% b) Find the beta of a portfolio of three stocks. One third of the portfolio is invested in each of the stocks. The stocks and their betas are as follows: Mallmart, beta 1.10; Peak Power Co., beta 0.85; and Micro Ease, beta 1.40.QUESTION 6 Calculate the expected return for C Inc., which has a beta of 0.8 when the risk-free rate is 0.04 and you expect the market return to be 0.12. a. 8.10 percent b. 9.60 percent c. 10.40 percent d. 11.20 percent e. 12.60 percent
- Salalah Oil,has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm's beta. Select one: a. None of these b. 1.20 c. 1.25 d. 1.6011-6 The current risk-free rate of return, rRF, is 4 percent and the market risk pre- mium, RPM, is 5 percent. If the beta coefficient associated with a firm’s stock is 2.0, what should be the stock’s required rate of return? 11-7 If the risk-free rate of return, rRF, is 4 percent and the market return, rM, is expected to be 12 percent, what is the required rate of return for a stock with a beta, , equal to 2.5?Q16 A manager believes his firm will earn a 14 percent return next year. His firm has a beta of 1.5, the expected return on the market is 12 percent, and the risk-free rate is 4 percent.Compute the return the firm should earn given its level of risk. REQUIRED RETURN. % Determine whether the manager is saying the firm is undervalued or overvalued.multiple choice undervalued overvalued
- The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. If the firm's stock has a beta of 1.21, what is the cost of equity? Group of answer choices 11.40% 13.82% 12.79% 12.47% 12.61%#24 Suppose the risk-free rate is 2.80% and an analyst assumes a market risk premium of 5.25%. Firm A just paid a dividend of $1.02 per share. The analyst estimates the β of Firm A to be 1.31 and estimates the dividend growth rate to be 5.00% forever. Firm A has 279.00 million shares outstanding. Firm B just paid a dividend of $1.89 per share. The analyst estimates the β of Firm B to be 0.75 and believes that dividends will grow at 2.09% forever. Firm B has 200.00 million shares outstanding. What is the value of Firm A? Answer format: Currency: Round to: 2 decimal places.What is the beta of a firm whose equity has an expected return of 21.3 percent when the risk - free rate of return is 7.0 percent and the expected return on the market is 18.0 percent ? Select one a . None of these b . 0.79 C. 1.30 d . 1.57
- 21. A firm has an expected dividend payout ratio of 60% and an expected future growth rate of 9%. What should the firm's fundamental price-to-earnings (P/E) ratio be if the required rate of return on stocks of this type is 15%?A. 5.0x.B. 7.5x.C. 10.0x.Part 1: Dallas Star Inc. 's stock has a 40% chance of producing a 5% return, and a 60% chance of producing a 25% return. What is the firm's expected rate of return? What is the firm's Standard Deviation? What is the firm's Coefficient of Variation? Part 2: Calculate the required rate of return for Dallas Star Inc., assuming that (1) the nominal risk-free rate is 7%, (2) expected market return is 10% and (3) the firm has a beta of 2. (Hint: You need to find out market risk premium first.)Question 7 The Amelia Knight investment fund has a total capital of R120 000 invested in three shares: SharesReturnInvestedTechnological Sector25%R60 000Education Sector13%R30 000Mining Sector20%R30 000 The current risk-free rate is 5,5%. Market returns have the following estimated probability distribution for the next period: ProbabilityMarket return0,3–10%0,1 14%0,2 15%0,4 18% What is the beta coefficient of the investment fund? 1. 0,52 2. 0,80 3. 1,82 4. 4,92