The following table shows betas for several companies. Calculate each stock's expected rate of return using the CAPM. Assume the risk-free rate of interest is 5%. Use a 7% risk premium for the market portfolio. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Company Caterpillar Apple Johnson & Johnson Consolidated Edison Beta 1.73 1.37 0.56 0.28 Cost of Capital % % % %

The following table shows betas for several companies. Calculate each stock's expected rate of return using the CAPM. Assume the risk-free rate of interest is 5%. Use a 7% risk premium for the market portfolio. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Company Caterpillar Apple Johnson & Johnson Consolidated Edison Beta 1.73 1.37 0.56 0.28 Cost of Capital % % % %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 7P

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The following table shows betas for several companies. Calculate each stock’s expected rate of return using the CAPM. Assume the risk-free rate of interest is 4%. Use a 7% risk premium for the market portfolio. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Company Beta Cost of Capital Caterpillar 0.98 % Apple 1.35 % Johnson & Johnson 0.69 % Consolidated Edison 0.13 %
The following table shows betas for several companies. Calculate each stock's expected rate of return using the CAPM. Assume the risk-free rate of interest is 6%. Use a 8% risk premium for the market portfolio. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Company Beta Cost of Capital Caterpillar 1.66 % Apple 1.30 % Johnson & Johnson 0.49 % Consolidated Edison 0.21 %
Using the equity asset valuation model (CAPM) equation, determine the required return for the shares of the following companies, if the market return is 7.50% (Rm = 7.50%) and the risk-free asset return is 1.25% (RF = 1.25%). You must show all counts. Stock Beta SKT 0.65 COST 0.90 SU 1.42 AMZN 1.57 V 0.94
Ran Company wants to determine its cost of common stock equity using the CAPM. The company's investment advisors indicate that the firm’s beta is equals to 1.3;the risk-free rate is 6%; and the market return is 10%. (Do not round off between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%)
A stock has a Beta of 1.0. The risk-free rate is 4.7%, and the Market Risk Premium is estimated at 7.4%. The firm's cost of common equity, Re, is _____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process.
A stock has a Beta of 1.13. The risk-free rate is 3.2%, and the Market Risk Premium is estimated at 6.4%. The firm's cost of common equity, RE, is _____%. Do not round any intermediate work, but round your final answer to 2 decimal places (example: enter 12.34 for 12.34%). Do not enter the % sign.
The common stock of Anthony Steel has a beta of 1.5. The risk-free rate is 6 percent and the market risk premium (rm - rf) is 6 percent. What is the company's cost of common stock, rs? Express your answer in percentage (without the % sign) and round it to two decimal places
Suppose that you have estimated the CAPM betas for the equity shares of the following two firms: Levi Strauss & Co. ( NYSE: LEVI): \beta ^ LEVI = 1.10 Tesla Inc. (Nasdaq: TSLA) : \beta ^ TSLA = 1.90 Assume that the risk - free rate is estimated at 4%, stable over the entire CAPM estimation period, and will remain in the foreseeable future. Answer questions a) and b) below. (Lecture notes p.12, pp.15-17) Suppose the expected return on S&P 500 index, a proxy for the market portfolio, is estimated at 17%. Find the CAPM required returns on equity shares of Levi's and Tesla, respectively. Answer (show the steps/calculation toward your results): Suppose the market risk premium is estimated at 9%. Find the CAPM required returns on equity shares of Levi's and Tesla, respectively. Answer (show the steps/calculation toward your results):
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Solve for no. 3 only
Sections C through F please