Use the information from this table to find the expected return for each asset. State of Economy Probability of State Return on Asset J Return on Asset K Boom 30% 5% 24% Growth 40% 5% 12% Stagnant 20% 5% 4% Recession 10% 5% -10%
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Use the information from this table to find the expected return for each asset.
|
State of Economy |
Probability of State |
Return on Asset J |
Return on Asset K |
|
Boom |
30% |
5% |
24% |
|
Growth |
40% |
5% |
12% |
|
Stagnant |
20% |
5% |
4% |
|
Recession |
10% |
5% |
-10% |
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- The probability distribution of the returns of two assets, A and B, are shown in the table below. Calculate the covariance between the returns of asset A and asset B. State of Economy Probability of State Return of Asset A Return of Asset B Boom 0.20 40% 5% Normal 0.45 20% 10% Slow Down 0.25 0% 15% Recession 0.10 -20% 30% O-0.3750 -0.0114 0.3750 -50.2500 -2.525Use the information from this table to calculate the correlation coefficient for the assets. State of Economy Probability of State Return on Asset J Return on Asset K Boom 30% 5% 24% Growth 40% 5% 12% Stagnant 20% 5% 4% Recession 10% 5% -10%Use the information from this table to find the standard deviation for each asset. State of Economy Probability of State Return on Asset J Return on Asset K Boom 30% 5% 24% Growth 40% 5% 12% Stagnant 20% 5% 4% Recession 10% 5% -10%
- Considering the following information gathered: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession 0.11 -0.03 Normal 0.45 0.16 Boom 0.44 0.29 Please Calculate the expected return. Multiple Choice 18.65% 2.80% 19.63% 20.61% 20.42%Assume the following ratios are constant: Total asset turnover Profit margin Equity multiplier Payout ratio 2.5 6.5% 1.6 20% What is the sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %Assume the following ratios areconstant: Total asset turnover 2.8Profit margin 6.8 % Equitymultiplier 2 Payout ratio 30 %What is the sustainable growthrate? (Do not round intermediate Training calc
- Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site. Selected data for the Derby Corporation are shown here. Use the data to answer the following questions. Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. Calculate the estimated Year-0 price per share of common equity.The possible rates of return of two assets, A and B, under different economic conditions are given below: Economic Situation Probability Return of Asset A Return of Asset B Recession 0.2 10% 6% Stable 0.5 14% 15% Growth 0.3 20% 11% An investor places 50% of his funds in Asset A and 50% in Asset B. [Note: you may use correlation between A and B as 0.2401] Required: (i)Calculate the risk and expected return for each asset. (ii)Calculate the risk and expected return of the investor’s 2-assets portfolio. (iii) What do you understand by total risk?Assume the following ratios are constant. Total asset turnover 1.49 Profit margin 8.7% Equity multiplier 1.6 Payout ratio 55% What is the sustainable growth rate?
- Using the table below show and explain whether the two assets A and B are ideal for Hedging State of the world Probability Return A Return B Expansion 25% 32% 5% Normal 50% 14% 15% Recession 25% 4% 25%Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ration 2.29 Sustainable growth rate 5.7% 1.76 36% What is the sustainable growth rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.Consider the table given below to answer the following question. Year Asset value Earnings Net investment Free cash flow (FCF) Return on equity (ROE) Asset growth rate Earnings growth rate 10.00 Present value 1.20 1.29 0.00 0.12 0.12 2 3 4 5 6 7 8 9 10 1.84 11.20 12.54 14.05 15.31 16.69 18.19 19.29 20.44 21.67 1.34 1.51 1.69 2.00 2.18 2.31 2.45 2.60 1.34 1.51 1.26 1.38 1.50 1.09 1.16 1.23 1.30 0.42 0.46 0.50 1.09 1.16 1.23 1.30 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.09 0.09 0.06 0.06 0.06 0.06 0.00 0.00 0.12. 0.12 0.12 0.09 0.12 0.12 0.12 0.09 0.09 0.09 0.06 0.06 0.06 Assuming that competition drives down profitability (on existing assets as well as new investment) to 11.5% in year 6, 11% in year 7. 10.5% in year 8, and 8% in year 9 and all later years. What is the value of the concatenator business? Assume 10% cost of capital. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) D $ 14.46 million
