Problem 11.14 – Risk and Expected Return
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
Find the stock’s expected return and standard deviation.
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Find the stock’s expected return and standard deviation.
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Determine the expected rate of return and standard deviation of return of Tower of Pita. Owner of a gambling casino or a bankruptcy lawyer?
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Calculate the expected return and standard deviation of Escapist and do it again but invest half into Escapist and half into Tower of Pita.
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Find the sensitivity of the operating cash flow based on changes in quantity.
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Find upper and lower bounds for projections, base-case NPV, best-case and worst-case scenarios, the sensitivity of base-case NPV to changes in fixed costs, the cash break-even level, the accounting break-even level, and the degree of operating leverage.
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Determine the following: variance and standard deviation of each stock which is riskier, returns in each month, and the variance more or less halfway between the two stocks.
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Figure out the payback period, NPV, and IRR.
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Find the number of miles and what price per gallon is needed to make buying a hybrid worth it.
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Find the cash flow per plane and the number of planes to sell for the different scenarios.
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Find the OCF, NPV, Worst-case NPV, and Best-case NPV.
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