Question

Walmart is planning an Internet subsidiary to compete head-to-head with Amazon. It argues that it can compete aggressively in Internet retailing because it has a low beta and its shareholders will be content with an expected rate of return of only 4.8%. Is the argument correct?

Expected Return (%) U.S. Steel Disney Ford General Electric Monsanto Boeing Union Pacific Alphabet ExxonMobil Amazorn Intel Pfizer Starbucks BM McDonald's Coca-Cola Campbell Soup Walmart Newmont Mining PG&E Beta 1.85 1.42 1.31 1.20 1.19 1.01 1.00 0.96 0.94 0.93 0.91 0.90 0.79 0.59 0.51 0.49 0.47 0.26 0.24 0.23 16.0 12.9 12.2 11.4 11.3 10.1 10.0 9.8 9.6 9.5 9.4 9.3 8.5 6.6 6.4 6.3 4.8 47 4.6

Answer 1

	beta	expected return	return
US STEEL	1.85	16.0	29.6
	1.42	12.9	18.32
	1.31	12.2	15.98
	1.20	11.4	13.68
	1.19	11.3	13.45
	1.01	10.1	10.20
	1.00	10.0	10.00
	0.96	9.8	9.408
	0.94	9.6	8.64
	0.93	9.5	8.84
	0.91	9.4	8.55
	0.90	9.3	8.37
	0.79	8.5	6.71
	0.59	7.1	4.19
	0.51	6.6	3.366
	0.49	6.4	3.14
	0.47	6.3	2.96
	0.26	4.8	1.24
	0.24	4.7	1.13
	0.23	4.6	1.06
	19.01		178.84

THE CONTENTION OF THE WALMART IS NOT CORRECT AS IT CLEARLY SHOWS THAT THE RETURN IS MORE BUT THE RISK IS ASLO HIGH