1. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks using CAPM model you are required to find the risk-free rate of the new stocks having the cost of 30% with a beta of 4., and a market risk premium of 7%. 2. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks using CAPM model you are required to find the beta of the new stocks having the costs of 10% with a risk-free rate of 5% and a market risk premium of 15%. 3. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks

Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter5: Risk Analysis
Section: Chapter Questions
Problem 11QE: Market equity beta measures the covariability of a firms returns with all shares traded on the...
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1. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks,
using CAPM model you are required to find the risk-free rate of the new stocks having the cost
of 30% with a beta of 4., and a market risk premium of 7%.
2. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks,
using CAPM model you are required to find the beta of the new stocks having the costs of 10%
with a risk-free rate of 5% and a market risk premium of 15%.
3. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks,
using CAPM model you are required to find the market rate of return of the new stocks having
the cost of 20% with a beta of 2, and a market risk premium of 7%.
Transcribed Image Text:1. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks, using CAPM model you are required to find the risk-free rate of the new stocks having the cost of 30% with a beta of 4., and a market risk premium of 7%. 2. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks, using CAPM model you are required to find the beta of the new stocks having the costs of 10% with a risk-free rate of 5% and a market risk premium of 15%. 3. A company is in dire need of a fund and is planning to invest by issuing new ordinary stocks, using CAPM model you are required to find the market rate of return of the new stocks having the cost of 20% with a beta of 2, and a market risk premium of 7%.
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