Problem 12.27 – CAPM
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
Determine the following: risk premium, required return, does it have positive NPV, what is its beta.
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Determine the following: risk premium, required return, does it have positive NPV, what is its beta.
Your numbers will vary.
Given the internal rate of return, beta’s, risk-free rate, and expected rate of return… determine the required rate of return, if the project should be accepted, the required rate of return on the project, and should it be accepted.
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Given the treasury bill rate, market risk premium, and the beta and internal rate of return… figure out the project costs of capital and which capital investments have positive NPVs.
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Given perpetual income, T-bill rate, and expected market return… figure out the property value.
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Which strategy should the investor employ if an investor seeks to invest in companies with high operating leverage while maintaining a portfolio beta of 1.0?
What is the likely outcome for investors with portfolios of aggressive stocks in the event of an 8% decline in the overall market?
When might the company cost of capital be an unsuitable discount rate for a capital budgeting proposal?
What is the typical value of the average of the betas for all stocks?
What is the beta associated with a U.S. Treasury bill?
Which stocks are expected to generate more profit in the scenario where you are willing to bet on a prolonged uptrend in the stock market?