The U.S. risk-free rate is currently 4 percent. The expected U.S. market return is 11 percent. Solso, Inc. is considering a project that has a beta of 1.5. What is the cost of dollar-denominated equity?
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The U.S. risk-free rate is currently 4 percent. The expected U.S. market return is 11 percent. Solso, Inc. is considering a project that has a beta of 1.5. What is the cost of dollar-denominated equity?
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- (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.)Suppose that right now, the market price of one Chinese yuan (CNY) is USD 0.15; that is, one can purchase or sell CNY1.00 for USD0.15. The proportional standard deviation for CNY in terms of USD is 20%. The Chinese riskless return rate over a two-year period is projected to be 8%; U.S. ratesover the same period are 2%. What is the dollar value of a two-year European put on a single yuan if the exercise price of the put is USD0.20?The expected return on a share of ExxonMobil stock in the U.S. is 15.6% while the expected return on a share of Royal Dutch Shell stock is 12.6% in the Netherlands. If the pure rate of return is 2% in both countries and the required risk premium is 6% for each company's stock, what is the long-term expected inflation rate in each country if the multiplicative form of the Fisher model is used in making the calculations?
- (Capital Asset Pricing Model) CSB, Inc. has a beta of 0.758. If the expected market return is 10.5 percent and the risk-free rate is 6.5 percent, what is the appropriate expected return of CSB (using the CAPM)? The appropriate expected return of CSB is%. (Round to two decimal places.)Based in the U.S., Your firm faces a 25% chance of a potential loss of $20 million next year. If yourfirm implements new policies, it can reduce the chance of this loss by 10%, but these new policieshave an upfront cost of $300,000. Suppose the beta of the loss is 0, and the risk-free interest rate5%.ISa) If the firm is uninsured, what is the NPV of implementing the new policies?b) If the firm is fully insured, what is the NPV of implementing the new policies?c) Given your answer to question b), what is the actuarially fair cost of full insurance?d) What is the minimum-size deductible that would leave your firm with an incentive toimplement the new policies?e) What is the actuarially fair price of an insurance policy with the deductible in question d14) A company is considering a project in Chile. The beta for Chile is 1.1. The firm has an equity beta of 1.10 and a value of 2000M and debt of 500M and cash and marketable securities of 100M. If the risk- free rate is 2% and the GRP is 6%, what is the proper cost of capital for the project in Chile?
- You have an investment opportunity in Japan. It requires an investment of $1.06 million today and will produce a cash flow of ¥109 million in one year with no risk. Suppose the risk-free interest rate in the United States is 3.8%, the risk-free interest rate in Japan is 2.5%, and the current competitive exchange rate is ¥110 per dollar. What is the NPV of this investment? Is it a good opportunity? What is the NPV of this investment? The NPV of this investment is S. (Round to the nearest dollar)Required: Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 4% and IR 5%. A stock with a beta of 1 on IP and 0.6 on IR currently is expected to provide a rate of return of 16%. If industrial production actually grows by 5%, while the inflation rate turns out to be 6%, what is your best guess for the rate of return on the stock? (Round your answer to 1 decimal place.) Rate of return 16.6%(Capital Asset Pricing Model) Breckenridge, Inc., has a beta of 0.79. If the expected market return is 10.0 percent and the risk-free rate is 6.0 percent, what is the appropriate expected return of Breckenridge (using the CAPM)? The appropriate expected return of Breckenridge is %. (Round to two decimal places.)
- Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 5% and IR 5%. A stock with a beta of 1 on IP and 0.7 on IR currently is expected to provide a rate of return of 10%. If industrial production actually grows by 6%, while the inflation rate turns out to be 6%, what will be your expected rate of return on the stock, given the new information about the industrial production rate and the inflation rate? (Enter your answer as a percentage rounded to 1 decimal places.) Expected rate of return %A typical telecom satellite costs $250 million. The launch with an Ariane rocket costs another $220 million. (Obviously, you need both.) Rockets have a beta of 0.5 and tend to break up during launch with about 20% probability. Telecom services have a beta of 1.5. Assume a CAPM with an equity premium of 3% and a risk-free rate of 2%. Assume an inflation rate of 1.5% per annum. Assume that a successfully launched satellite will last exactly 10 years and expects to yield a constant $100 million in revenue per year. Should you launch?Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 3%, and IR 5%. A stock with a beta of 1 on IP and .5 on IR currently is expected to provide a rate of return of 12%. If industrial production actually grows by 5%, while the inflation rate turns out to be 8%, what is your revised estimate of the expected rate of return on the stock?