which of the following types of risks is considered irrelevant when determining the appropriate required rate...
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Correct answer is option : c) firm specific risks
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which of the following types of risks is considered irrelevant when
determining the appropriate required rate...
5,6,7,8 5. Stock valuation is impacted by 2. Dividends b. The growth rate of dividends c....
5,6,7,8
5. Stock valuation is impacted by 2. Dividends b. The growth rate of dividends c. The risk associated with the firm issuing the stock d. All of the above e. Answers a, b, and c plus for how much you can sell the stock in the future. Inflation, recession, and high interest rates are economic events that are best characterized as being a. systematic risk factors that can be diversified away. b. company-specific risk factors that can be diversified...
When firms consider issuing equity, or 'stock', which is a share in the ownership in the...
When firms consider issuing equity, or 'stock', which is a share in the ownership in the firm, the cost can be estimated by using a number of approaches. The most frequently used today is the capital asset pricing model (CAPM). This model says that the market-required return on any capital asset (equity or stock being examples of 'capital assets') can be estimated by considering the risk-free rate of return, because investing means that consumption must be delayed, plus an adjustment...
Which of the following risks of a stock are likely to be firm-specific, diversifiable risks, and...
Which of the following risks of a stock are likely to be firm-specific, diversifiable risks, and which are likely to be systematic risks? Which risks will affect the risk premium that investors will demand? A. The risk that the founder and CEO retires B. The risk that oil prices rise, increasing production costs C. The risk that a product design is faulty and the product must be recalled D. The risk that the economy slows, reducing demand for the firm's...
Inflation, recession, and high interest rates are economic events that are best characterized as being a...
Inflation, recession, and high interest rates are economic events that are best characterized as being a systematic risk factors that can be diversified away. b. company-specific risk factors that can be diversified away. c. among the factors that are responsible for market risk. d. risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers. c. irrelevant except to governmental authorities like the Federal Reserve. Calculate the required rate of return...
Term Answer Description A. The general term that describes the portion of an asset's total expected...
Term Answer Description A. The general term that describes the portion of an asset's total expected return that is greater than the return earned on the market's risk-free rate Expected rate of return B. The practice of creating a portfolio of assets for the purpose of reducing the stand-alone risk of the individual assets in the portfolio Beta coefficient C. This statistical value provides a standardized measure of a security's risk per unit of return, and is useful in comparing...
A) Using the CAPM, estimate the appropriate required rate of retun for the following three stocks,...
A) Using the CAPM, estimate the appropriate required rate of retun for the following three stocks, given that the risk-free rate is 5%, and the expected return for the market is 17%. Stock A - Beta 0.75 Stock B- Beta 0.90 Stock C- Beta 1.40 B) If you are planning to buy an equally-weighted portfolio of these three stocks, what will e your required rate of return on the portfolio? C) What is the beta of the portfolio? D) Calculate...
A share preferred stock pays a dividend of $0.50 each quarter. If investors are willing to pay $20.00 for this pref...
A share preferred stock pays a dividend of $0.50 each quarter. If investors are willing to pay $20.00 for this preferred stock, what is the nominal, not effective, component cost of capital? a. 10% b. 8% c. 6% d. 12% e. There is not enough information to answer this question Stock valuation is impacted by 2. Dividends b. The growth rate of dividends c. The risk associated with the firm issuing the stock d. All of the above c. Answers...
UESTION 7 Most investment firms provide estimates of systematic risks of securities, called betas...
UESTION 7 Most investment firms provide estimates of systematic risks of securities, called betas. A stock's beta measures the relationship between the stock's rate of return and the rate of return for the market as a whole. The term beta derives its name from the beta coefficient for the slope in simple linear regression, where the dependent variable is the stock's rate of return and the independent variable i:s the market rate of return. Stocks with beta values greater than...
need all answers need all 1-4 Which of the following is irrelevant to capital investment analysis?...
need all answers
need all 1-4
Which of the following is irrelevant to capital investment analysis? a. Investment costs b. Net cash flows c. Carrying value d. Residual value QUESTION 2 Which of the following items can be described as a noncash expense? a. Wages b. Income taxes c. Depreciation d. Advertising QUESTION 3 When giving consideration to long-range investment decisions, which of the following best describes the time value of money: O a weighting cash flows with subjective probabilities...
Using the CAPM, estimate the appropriate required rate of return for the three stocks listed here,...
Using the CAPM, estimate the appropriate required rate of return for the three stocks listed here, given that the risk-free rate is 6 percent and the expected return for the market is 14 percent. STOCK BETA A 0.62 B 1.09 C 1.48 a. Using the CAPM, the required rate of return for stock A is %. (Round to two decimal places.) b. Using the CAPM, the required rate of return for stock B is %. (Round to two decimal places.)...
5,6,7,8
5. Stock valuation is impacted by 2. Dividends b. The growth rate of dividends c. The risk associated with the firm issuing the stock d. All of the above e. Answers a, b, and c plus for how much you can sell the stock in the future. Inflation, recession, and high interest rates are economic events that are best characterized as being a. systematic risk factors that can be diversified away. b. company-specific risk factors that can be diversified...
Which of the following risks of a stock are likely to be firm-specific, diversifiable risks, and which are likely to be systematic risks? Which risks will affect the risk premium that investors will demand? A. The risk that the founder and CEO retires B. The risk that oil prices rise, increasing production costs C. The risk that a product design is faulty and the product must be recalled D. The risk that the economy slows, reducing demand for the firm's...
Inflation, recession, and high interest rates are economic events that are best characterized as being a systematic risk factors that can be diversified away. b. company-specific risk factors that can be diversified away. c. among the factors that are responsible for market risk. d. risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers. c. irrelevant except to governmental authorities like the Federal Reserve. Calculate the required rate of return...
Term Answer Description A. The general term that describes the portion of an asset's total expected return that is greater than the return earned on the market's risk-free rate Expected rate of return B. The practice of creating a portfolio of assets for the purpose of reducing the stand-alone risk of the individual assets in the portfolio Beta coefficient C. This statistical value provides a standardized measure of a security's risk per unit of return, and is useful in comparing...
A share preferred stock pays a dividend of $0.50 each quarter. If investors are willing to pay $20.00 for this preferred stock, what is the nominal, not effective, component cost of capital? a. 10% b. 8% c. 6% d. 12% e. There is not enough information to answer this question Stock valuation is impacted by 2. Dividends b. The growth rate of dividends c. The risk associated with the firm issuing the stock d. All of the above c. Answers...
UESTION 7 Most investment firms provide estimates of systematic risks of securities, called betas. A stock's beta measures the relationship between the stock's rate of return and the rate of return for the market as a whole. The term beta derives its name from the beta coefficient for the slope in simple linear regression, where the dependent variable is the stock's rate of return and the independent variable i:s the market rate of return. Stocks with beta values greater than...
need all answers
need all 1-4
Which of the following is irrelevant to capital investment analysis? a. Investment costs b. Net cash flows c. Carrying value d. Residual value QUESTION 2 Which of the following items can be described as a noncash expense? a. Wages b. Income taxes c. Depreciation d. Advertising QUESTION 3 When giving consideration to long-range investment decisions, which of the following best describes the time value of money: O a weighting cash flows with subjective probabilities...
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