PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 13, Problem 15PS
Summary Introduction
To compute: Company F’s abnormal
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Analysis of 60 monthly rates of return on United Futon common stock
indicates a beta of 1.54 and an alpha of -0.29% per month. A month
later, the market is up by 5.9%, and United Futon is up by 6.9%. What is
Futon's abnormal rate of return?
Note: A negative answer should be indicated by a minus sign. Do not
round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places.
Rate of return
%
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Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.53 and an alpha of –0.28% per month. A month later, the market is up by 5.8%, and United Futon is up by 6.8%. What is Futon’s abnormal rate of return?
Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.65 and an alpha of –0.40% per month. A month later, the market is up by 7%, and United Futon is up by 8%. What is Futon’s abnormal rate of return? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Chapter 13 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 13 - Market efficiency True or false? The...Ch. 13 - Prob. 2PSCh. 13 - Market efficiency Which (if any) of these...Ch. 13 - Prob. 4PSCh. 13 - Market efficiency How would you respond to the...Ch. 13 - Market efficiency Respond to the following...Ch. 13 - Prob. 7PSCh. 13 - Prob. 8PSCh. 13 - Market efficiency evidence Which of the following...Ch. 13 - Prob. 10PS
Ch. 13 - Prob. 11PSCh. 13 - Prob. 12PSCh. 13 - Market efficiency implications What does the...Ch. 13 - Prob. 14PSCh. 13 - Prob. 15PSCh. 13 - Abnormal returns Here are alphas and betas for...Ch. 13 - Prob. 18PSCh. 13 - Behavioral finance True or false? a. Most managers...Ch. 13 - Prob. 20PSCh. 13 - Prob. 21PSCh. 13 - Prob. 22PS
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- Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.46 and an alpha of -0.21% per month. A month later, the market is up by 5.1%, and United Futon is up by 6.1 %. What is Futon's abnormal rate of return? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of return (1.34)arrow_forwardDW Company stock has an annual return mean and standard deviation of 14.5 percent and 43 percent, respectively. What is the smallest expected loss in the coming year with a probability of 16 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Smallest expected loss -2.43 %arrow_forwardA stock has an abnormal return of -0,8% per month. What is the annualized abnormal return? The answer should be given in decimal form with three decimals (e.g., if the correct answer is 2.4% write 0.024)arrow_forward
- An index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time:rF = .10% + 1.1rMIf the market index subsequently rises by 8% and Ford’s stock price rises by 7%, what is the abnormal change in Ford’s stock price?arrow_forwardWoodpecker, Inc., stock has an annual return mean and standard deviation of 12.6 percent and 44 percent, respectively. What is the smallest expected loss in the coming month with a probability of 16.0 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss %arrow_forwardHere are alphas and betas for Company X and Company Y for the 60 months ending April 2019. Alpha is expressed as a percent per month. A month later, the market is up by 5%, X is up by 6% and Y is up by 3%. (3a) What is the abnormal rate of return for X and Y? ] Alpha Beta X 0.57 1.08 Y 0.46 0.65 The table below shows a condensed income statement and balance sheet for a plant. Income Statement Assets at 31 December 2018 Revenue 56.66 Net working capital 7.08 Raw materials cost 18.72 Operating cost 21.09 Depreciation Investment plant & equipment 69.33 4.50 Less accumulated depreciation Net plant & equipment 21.01 Pretax income 12.35 48.32 Tax at 35% 4.32 Net income 8.03 Total assets 55.40 (3b) Calculate the plant's EVA. Assume the cost of capital is 9%. (3c) Assume now that the plant could be sold to another company for $95 million. How should this fact change your calculation of EVA? Explain your answerarrow_forward
- The last four years of returns for a stock are as follows: 2 27.9% Year Return 1 -3.5% 3 12.5% a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? a. What is the average annual return? The average return is %. (Round to two decimal places.) 4 3.6%arrow_forwardAn index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time: rF = 0.1% + 1.1rM If the market index subsequently rises by 7.3% and Ford’s stock price rises by 7%, what is the abnormal change in Ford’s stock price? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.).arrow_forwardAn index model regression applied to past monthly returns in Ford's stock price produces the following estimates, which are believed to be stable over time: rF = 0.1% + 1.1rM If the market index subsequently rises by 9.0% and Ford's stock price rises by 9%, what is the abnormal change in Ford's stock price? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Abnormal return %arrow_forward
- The last four years of returns for a stock are as follows: 2 28.5% Year Return 1 -3.7% a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? a. What is the average annual return? The average return is %. (Round to two decimal places.) CONS W P SOSIAN 3 11.7% P 20 4 4.3% ...arrow_forwardThe common stock of Manchester & Moore is expected to earn 14.8 percent in a recession, 8 percent in a normal economy, and lose 5.8 percent in a booming economy. The probability of a boom is 12 percent while the probability of a recession is 6 percent. What is the expected rate of return on this stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)arrow_forwardWoodpecker, Incorporated, stock has an annual return mean and standard deviation of 11.4 percent and 58 percent, respectively. What is the smallest expected loss in the coming month with a probability of 16.0 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places. Smallest expected loss -46.25%arrow_forward
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