A project has an assigned beta of 1.24, the risk-free rate is 3.8%, and the market rate of return is 9.2%. What is the project's expected rate of return? A. 15.21% B. 11.41% C. 10.50% D. 14.61%

Q: You are considering Project A, with the following information (Assume all statistics given are…

A: The Capital Asset Pricing Model (CAPM) explains the relative rate of return for an asset or project…

Q: You are considering investing in a project with the following possible outcomes: Probability of…

A: The expected return is the value of profits that investment would provide on average. It is used by…

Q: You are considering investing in one of two projects, which have the following returns and…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow…

A: >Please refer to the spreadsheet below for calculation and answer. Cell reference is also…

Q: a and b please

A: Given :Rf​=5βSMB​=0.9,RPSMB​=6 βHML​=0.8,RPHML​=7 βMOM​=0.4,RPMOM​=4 Step 2: Part (a): Expected…

Q: An all-equity firm is considering the projects shown below. The T-bill rate is 5 percent and the…

A: The CAPM return represents the anticipated return on an investment and is derived from the CAPM…

Q: A project has a beta of 0.94, the risk-free rate is 3.4%, and the market risk premium is 7.6%. The…

A: Project expected return = Risk free rate + Market risk premium * Project Beta

Q: ll rate is 6% and the market risk premium is 7%.   Project Beta Internal Rate of Return, % P…

A: Cost of capital can be found out from the capital asset pricing model using equation.

Q: Given an expected return of 8% and a standard deviation of 9%, we can predict that there is a _____…

A: Given: Expected Return/Mean = 8% Standard deviation σ = 9% Observed Values = -19% and 35% Using the…

Q: What is the expected rate of return if the beta is 1.14 and the Rf is 4.2%, Rm is 12%

A: According to Capital asset pricing model ,k = Rf+[b*(Rm-Rf)]wherek= expected rate of returnRf= risk…

Q: An investment has the following possible returns:   Return: 13%; Probability: 40%   Return: 8%;…

A: The expected return is the minimum required rate of return which an investor required from the…

Q: If a project has a profitability index of 1.20, then the project's internal rate of return is O…

A: The profitability index is used to determine the attractiveness of an investment. It is computed by…

Q: A project under consideration has an internal rate of return of 13% and a beta of 0.8. The risk-free…

A: CAPM is the model of valuing the required rate of return an investor wants from a company, It is the…

Q: You estimate that a planned project for your company has a 0.3 chance of tripling the investment in…

A: Standard deviation = Where,Ri = returnPi = Probability.

Q: What is the required rate of return on the project? (De

A: Capital Asset Pricing Model (CAPM) is a measure used for the measurement of systematic risk. It…

Q: An all-equity firm is considering the projects shown below. The T-bill rate is 5 percent and the…

A: The risk-free rate is 5% and Market Risk Premium is 9%.

Q: What will be the discounting rate for a project with a 4% risk-free rate and 8% market risk premium…

A: Discounting is the factoring rate used to calculate the present value or future value of the cash…

Q: Consider two project alternatives, project I and project II, with their payoffs and their associated…

A: RRI stands for Relative Risk Index. It is a financial metric used to assess the risk adjusted…

Q: project has a forecasted cash flow of $121 in year 1 and $132 in year 2. The interest rate is 8%,…

A: The project has a forecasted cashflow's of $121 in year 1, and $132 in year 2, the interest rate is…

Q: What is the internal rate of return of an investment that requires a 10 percent minimum rate of…

A: IRR means internal rate of return.It is rate of return at which present value of cash inflows is…

Q: A project has a forecasted cash flow of $118 in year 1 and $129 in year 2. The interest rate is 5%,…

A: We have to use the CAPM formula first to calculate the cost of equity and then discount the cash…

Q: 5. a. b. C. d. e. Suppose that two firms, A and B, are considering the same project which has the…

A: Frist we need to calculate expected rate of return by using CAPM.The equation under CAPM is given…

Q: The NPV of a project is negative when the discount rate at 8%, but is positive when the discount…

A: IRR is internal rate of return. Internal rate of return is the discount rate where NPV i.e. net…

Q: Consider the given problem. If your risk-adjusted discount rate is 18%, is this project justifiable?

A: NPV is the net current worth of cash flows that are expected to occur in the future.

Q: A project under consideration has an internal rate of return of 13% and a beta of 0.6. The risk-free…

A: The CAPM model refers to the relationship between the expected return and the risk associated with…

Q: Suppose that you found the probabilities and expected NPVs of 3 scenarios for a timing option:…

A: 1) Computation of expected NPV:

Q: State and Prob. Project A's return Good. 30% Average 40% Poor 30% 27 18 5 Project B's return 35 15…

A: “Since you have posted a question with multiple subparts, we will solve the first three subparts for…

Q: Historically, DeSoto projects have had an average beta of 1.25, which indicates the higher risk…

A: The question can be answered by determining the required return for the "average" DeSoto project…

Q: Consider an economy with three states which occur with probability (0.2, 0.2, 0.6). Suppose a firm…

A: CAPM means Capital Assets Pricing Model. The formula for CAPM is: E(r)=Rf+beta(Rm-Rf) NPV is the…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.