You observe that a firm has a beta of 1.25, the expected return on the market portfolio is 10%, and the risk-free rate of return is equal to 3%. What is the estimated cost of new common equity raised internally by reinvesting earnings?
cost of new common equity =risk-free rate +Beta*(market rate- risk-free rate)
=3+1.25*(10-3)
which is equal to
=11.75%
You observe that a firm has a beta of 1.25, the expected return on the market portfolio is 10%, and the risk-free rate o...
A common stock has an equity beta of .60. The risk-free rate of return is 3% and the expected return on the market portfolio is 10%. What is the cost of equity capital?
TOISRULIUSS. Expected Return = Risk free Rate + beta (expected market return - risk free rate) .04 +0.80.09 - .04) = .08 = 8.0% 3. Suppose the MiniCD Corporation's common stock has a return of 12%. Assume the risk- free rate is 4%, the expected market return is 9%, and no unsystematic influence affected Mini's return. The beta for MiniCD is:
The risk-free rate of return is 3.25%,, the expected rate of return on the market portfolio is 13.75%, and the stock of ABC Corp has a beta of 1.3. ABC Corp pays out 35% of earnings in divdends, and the latest earnings announced were $7 per share. Dividends were just paid and are expected to be paid annually. You expect that ABC will earn an ROE of 18.50% per year on all reinvested earnings forever. 1. What is the intrinsic...
The risk-free rate is 6% and the expected rate of return on the market portfolio is 13%. a. Calculate the required rate of return on a security with a beta of 1.25. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. If the security is expected to return 16%, is it overpriced or underpriced?
(CAPM) A firm has a beta of 1.5. If expected market return is 5.5% and risk-free rate is 2%, what is the cost of equity? Show formula and work by hand-only. Do not use excel.
a. Compute the expected rate of return for Intel common stock, which has a 1.4 beta. The risk-free rate is 3 percent and the market portfolio (composed of New York Stock Exchange stocks) has an expected return of 12 percent. b. Why is the rate you computed the expected rate? P8-13 (similar to) Question Help (Expected rate of return using CAPM) a. Compute the expected rate of return for Intel common stock, which has a 1.4 beta. The risk-free rate...
Problem 2 (4 marks) You observe that the risk free rate of return is 2.5 percent and the market risk premium is 9 percent. You have $5,000 invested in stock A and $15,000 invested in stock B. You have calculated that the beta of stock A is 1.25 and the beta of stock B is 1.50. Calculate the expected return for your portfolio.
Assume that the risk-free rate is 9% and that the market portfolio has an expected return of 17%. Under equilibrium conditions as described by the CAPM, what would be the expected return for a portfolio having no diversifiable risk and a beta of 0.75?
The risk-free rate of return is 5%, the expected rate of return on the market portfolio is 16%, and the stock of Xyrong Corporation has a beta coefficient of 1.4. Xyrong pa Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 25% per year on al reinvested earnings forever. ys out 60% of its earnings in dividends, and the latest earnings announced were $700 per share. a. What is...
The risk-free rate of return is 5%, the expected rate of return on the market portfolio is 16%, and the stock of Xyrong Corporation has a beta coefficient of 1.4. Xyrong pays out 60% of its earnings in dividends, and the latest earnings announced were $7.00 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 25% per year on all reinvested earnings forever. a. What is the...