You have assigned the following values to these three firms: Upcoming Dividend $3.15 1.18 1.00 US Bancorp Praxair Eastman Kodak 7 Price $115.50 57.10 27.45 US Bancorp required return Praxair required return Eastman Kodak required return CAPM Growth 9.00% Assume that the market portfolio will earn 12.70 percent and the risk-free rate is 3.40 percent. Compute the required return for each company using both CAPM and the constant-growth model. (Do not round intermediate calculations and round your final answers to 2 decimal places.) % % % 14.50 9.20 Beta 1.42 2.14 1.84 Constant-Growth Model % % %

You have assigned the following values to these three firms: Upcoming Dividend $3.15 1.18 1.00 US Bancorp Praxair Eastman Kodak 7 Price $115.50 57.10 27.45 US Bancorp required return Praxair required return Eastman Kodak required return CAPM Growth 9.00% Assume that the market portfolio will earn 12.70 percent and the risk-free rate is 3.40 percent. Compute the required return for each company using both CAPM and the constant-growth model. (Do not round intermediate calculations and round your final answers to 2 decimal places.) % % % 14.50 9.20 Beta 1.42 2.14 1.84 Constant-Growth Model % % %

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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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

You have assigned the following values to these three firms:
Upcoming
Dividend
$3.15
US Bancorp
Praxair
Eastman Kodak
2
Price
$115.50
57.10
27.45
US Bancorp required return
Praxair required return
Eastman Kodak required return
1.18
1.00
CAPM
%
%
Growth
9.00%
Assume that the market portfolio will earn 12.70 percent and the risk-free rate is 3.40 percent.
Compute the required return for each company using both CAPM and the constant-growth model. (Do not round intermediate
calculations and round your final answers to 2 decimal places.)
%
14.50
9.20
Beta
1.42
2.14
1.84
Constant-Growth
Model
%
%
%

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