Answer the following questions based on the given information from table of probability distributions and rate of return investment of two companies namely; Celecom Bhd. and Pos Selaju Bhd. shares below: Table 2: Probability distributions and rate of returns for Celecom Bhd. and Pos Selaju Bhd. State of Economy Probability of the States Return (%). Celecom Bhd. Return (%) Pos Selaju Bhd. Boom Normal Recession 0.30 0.50 0.20 25 20 15 40 10 20 (i) Solve for the expected rate of return for Celecom Bhd. and Pos Selaju Bhd. shares. (ii) In your opinion, which share is more worth the profit for investment and why?

Answer the following questions based on the given information from table of probability distributions and rate of return investment of two companies namely; Celecom Bhd. and Pos Selaju Bhd. shares below: Table 2: Probability distributions and rate of returns for Celecom Bhd. and Pos Selaju Bhd. State of Economy Probability of the States Return (%). Celecom Bhd. Return (%) Pos Selaju Bhd. Boom Normal Recession 0.30 0.50 0.20 25 20 15 40 10 20 (i) Solve for the expected rate of return for Celecom Bhd. and Pos Selaju Bhd. shares. (ii) In your opinion, which share is more worth the profit for investment and why?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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For a typical firm, which of the following sequences is CORRECT? All rates are after taxes, and assume that the firm operates at its target capital structure rs: Cost of equities new stock issuance re: Cost of equities retained earnings rd: Cost of debts WACC: Weigthed average costs of capital rs > re rd WACC re rs > WACC rd. WACC > re> rs >rd. rd >rers > WACC
1.
D O Assume that Kish Inc. hired you as a consultant to help estimate its cost of capital. You have obtained the following data: Do = $0.90; Po = $47-50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings? Do not round your intermediate calculations. a. 2.03% b. 8.77% O c. 9.03% O d. 8.89% O e. 2.17% Q Search B G 8 40 E hp X Dropbox promotion fo 25 alt a W ctri *** prisc X delete backspace pause home
K-Life financial services Limited uses risk-adjusted return on capital (RAROC) to measure performance on several aspects. In this regard, imagine that an investment officer wants to execute a transaction with the following characteristics: Probability of default (PD) = 30 basis points Loss given default (LGD) = 55% Exposure at default (EAD) = K 1.45 million Expected loss (EL) = K 2,750 This is a loan to a company in the Agro industrial. The firm’s economic capital (EC) model is based on the 99% confidence level, with an average standard deviation of 2.15%. The risk-free rate of return is 6%. Assume that the bank has set a RAROC hurdle rate of 15% and this transaction has a net profit of K10, 500. REQUIRED: Compute the K-life’s risk-adjusted rate of return on this transaction. Now assume that K-life could also have made a loan for the same amount to a firm in the service industry, and that the standard deviation for economic capital purposes in this case is 1.29%. Compute the bank’s…
Based on the above information, calculate the sustainable growth rate for Kayla's Heavy Equipment.
To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: Do = $1.45; Po = $22.50; and g = 6.50% (constant). Based on the dividend growth approach, what is the cost of common from reinvested earnings? 11.68% 12,30% 12.56% 12.94% 13.36% O O o O o O
Based on the information in the table, what is the growth duration for Georgia Gauge? Report your answer rounded to one decimal place. P/E Ratio Expected Growth Rate Dividend Yield Answer: S&P Industrials Georgia Gauge, Inc. 25 0.16 0.02 16 0.05 0.04
Determining PB Ratio for Companies with Different Returns and Growth Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Note: NOPAT = NOA » RNOA. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI $100 $100 19% 19% 10% 2% $100 $100 12% 12% 10% 4% A B Round answers to two decimal places. PB Ratio Company A Company B
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The following information relates to the possible returns of ABC limited share depending on the performance of the economy: State of the economy Probability of the returns Return Boom 0.4 20% Normal 0.4 15% Recession 0.2 9% Required: i. Compute the expected return of the share ii. Compute the standard deviation and coefficient of variation of the share.
use EXCEL and provide Cell References for Calculations.
utilities versus Petroleum and natural gas 0.77 versus 1.31 food products (grocery stores)versus Apparel(retailers) 0.68 versus 1.09 Banking (Depository Institutions) versus Financial Trading 0.76 versus 1.09 (Security and commodity Brokers) For each matched pair of industries, use the CAPM to compute the required rate of return on equity capital for the median firm in each industry. Assume that the risk-free rate of return is 4.0% and the market risk premium is 5.0%

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