ZuoTi.Pro
Question

) Congratulations! You have been hired as a financial consultant to help Labriola, Inc. estimate its...

) Congratulations! You have been hired as a financial consultant to help Labriola, Inc. estimate its market beta. Labriola estimates that their project will return       -20% if the market returns -10%, and +5% if the stock market returns +10%. What would you use as the market beta estimate for the project?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Beta = Change in Return of Stock/Change in Return of market

= 125%/200%

= 0.625

Hence, beta = 0.625

0 0
Add a comment
Know the answer?
Add Answer to:
) Congratulations! You have been hired as a financial consultant to help Labriola, Inc. estimate its...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Rivoli Inc. hired you as a consultant to help estimate its cost of equity. You estimate...

    Rivoli Inc. hired you as a consultant to help estimate its cost of equity. You estimate the beta of the company at 1 and the current risk-free rate and the market rate at 2% and 10% respectively. What is the approximate cost of equity for the company?

  • Heino Inc., hired you as a consultant to help them estimate their cost of capital.  You have...

    Heino Inc., hired you as a consultant to help them estimate their cost of capital.  You have been provided with the following data:  risk-free rate = 5%; market risk premium = 6.0%, and beta = 1.05.  Based on the CAPM approach, what is the cost of equity from retained earnings given a flotation cost of 10%? 10.50% / 10.71% / 10.88% / 11.30% / 11.60%

  • Landmark, Inc. hired you as a consultant to help them estimate its cost of capital. You...

    Landmark, Inc. hired you as a consultant to help them estimate its cost of capital. You have been provided with the following data: its most recently paid dividend is $1.25; its current market price is $31.50; its ROE = 12% and its dividend payout ratio is 40%. New common stock will have an 8% flotation cost. Based on the DCF approach and the Retention Growth Model, what is the cost of equity from new common stock? Enter your answer rounded...

  • Assume that you have been hired as a consultant by CGT, a major producer of chemicals...

    Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, the company has long term debt/equity ratio of 0.5. The stock is currently selling for $15.25 per share, and its $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month T-bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market...

  • Rivoli Inc. hired you as a consultant to help estimate its cost of common equity. You...

    Rivoli Inc. hired you as a consultant to help estimate its cost of common equity. You have been provided with the following data: D0 = $0.80; P0 = $22.50; and g = 8.00% (constant). Based on the DCF approach, what is the cost of common from retained earnings? Answer 10.69% 11.25% 11.84% 12.43% 13.05%

  • To estimate the company's WACC, Marshall Inc. recently hired you as a consultant. You have obtain...

    To estimate the company's WACC, Marshall Inc. recently hired you as a consultant. You have obtained the following information. (1) The firm's existing noncallable bonds which mature in 40 years, have an 5.00% annual coupon, a par value of $1,000, and a market price of $950. You have done some research and estimate the cost of issuing additional debt would cost you similarly to the existing bonds. (2) The company's current tax rate is 40%, but the tax rate is...

  • Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained...

    Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,225.00 (2) The company's tax rate is 40%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock's beta is 1.20. (4) The target capital structure consists of 35% debt and the...

  • Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained...

    Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,000.00. (2) The company's tax rate is 25%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock's beta is 1.20. (4) The target capital structure consists of 35% debt and the...

  • Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained...

    Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,225.00. (2) The company's tax rate is 40%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock's beta is 1.20. (4) The target capital structure consists of 35% debt and the...

  • To estimate the company's WACC Marshall, Inc. recently hired you as a consultant. You have obtained...

    To estimate the company's WACC Marshall, Inc. recently hired you as a consultant. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8% annual coupon, a par value of $1000, and a market price of $1050. (2) The company's tax rate is 25%. (3) The risk rate is 4.50%, the market risk premium is 5.50%, and the stocks beta is 1.20. (4) The target capital structure consists of 35% debt and the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT