X plc required rate of return is 18.5% . The risk free rate is 8%. The return on the market portfolio is 15%. The company has five projects, details are as follows:
Beta coefficient | Revenue | Required Investment | Project |
.3 | 1095 | 1000 | A |
.5 | 1130 | 1000 | B |
1.0 | 1780 | 1500 | C |
1.5 | 2385 | 2000 | D |
2 | 2400 | 2000 |
Required:
1-Calculate the beta coefficient for this company.
2-Calculate the required rate of return for each project using the Capital Asset Pricing Model (CAPM).
3-Calculate the expected return for each project.
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X plc required rate of return is 18.5% . The risk free rate is 8%. The return on the market portfolio is 15%. The company has five projects, details are as follows: Beta coefficient Revenue Required Investment Project .3 1095 1000 A .5 1130 1000 B 1.0 17
1) A project has a market beta of 1.7. The risk-free rate is 3%, and the equity premium is 5%. Your firm should undertake this project only if it returns greater or equal to 8% greater or equal to 35% greater or equal to 8.3333% greater or equal to 11.5% 2) A zero-coupon bond has a beta of 0.3 and promises to pay $1000 next year with a probability of 95%. If the bond defaults, it will pay nothing. One...