I am buying a firm with an expected perpetual cash flow of $420 but am unsure of its risk. If I think the beta of the firm is 0, when the beta is really 1, how much more will I offer for the firm than it is truly worth? Assume the risk-free rate is 7% and the expected rate of return on the market is 15%. (Input the amount as a positive value.) Present value difference.

Use the following forecasted financials: (Certain cells were left intentionally blank by asker)  You may need to use the CAPM model. Assume beta equals 1.09, the risk-free rate is 1.62%, and the market risk premium is 4.72%.   d) Calculate the terminal value and the present value of the terminal value. Assume a long-term growth rate of 3%.         e)  Calculate Sherwin Williams value per share. The company has 263.3 million shares outstanding.

The expected return for the investment is ??? The standard deviation is ??? While the expected return for the​ risk-free assets, Treasury​ Bills, is ??? The standard deviation is​ ???

2. Consider the model of Moral Hazard where firms choose between investing one unit of output in a less risky or more risky project. The safer project yields with probability and zero otherwise while the risky project yields 2 with probability and zero otherwise i.e. TG = G = TB B = 2. Suppose firms finance their investment by borrowing 1 unit from a the fiinancial market at interest rate R. The financial market is risk neutral and requires an expected rate of return equal to the risk free rate which is assumed to be zero. Will there be an equilibrium with lending to firms from the financial market A. Yes B. No C. Not enough information D. None of A-C

(Capital Asset Pricing Model) Johnson Manufacturing, Inc., is considering several investments. The rate on Treasury bills is currently 7.5 percent, and the expected return for the market is 10.5 percent. What should be the expected rate of return for each investment (using the CAPM)? Security A B C D Beta 1.62 1.02 0.71 1.34 a. The expected rate of return for security A, which has a beta of 1.62, is%. (Round to two decimal places.)

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In Simpleland, there are only two risky assets in the market, A and B. The information and CAPM estimates of A and B are shown in the following table: A 100 Million 0.09 Market Capitalisation ($) |Variance (o²) Covariance between A and B Expected Return on Market Risk free rate 400 Million 0.01 0.2 20% 10% The manager believes that in the near future, B will outperform A by 5% with uncertainty measured in variance 0.0005. He has also assigned the error of estimating the above CAPM model in terms of variance to be 0.01, i.e. T = 0.01. a) What is the expected return of A and B under CAPM? 2.

You are now an equity analyst. We now find that the actual valuation of Company X is 130. Your manager suggests basing the price on a discounted dividend model and a discounted free cash flow valuation method. However, these two methods may produce very different estimates when applied to actual data. The discounted dividend model works out to a price of 60, while the discounted free cash flow valuation method works out to a price of 10. Question: Explain to your management why the two valuation methodologies provide different estimations. Specifically, discuss the assumptions implicit in the two methodologies, as well as the assumptions you made when doing your analysis. Why do these projections differ from Company X's current stock price?