(a)You are CFO of your company, Owl Enterprise. You hire a consultant who estimates that the expected...
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Question:
(a)You are CFO of your company, Owl Enterprise. You hire a consultant who estimates that the expected return of the market is 12%. The consultant also tells you that the risk-free rate is 2% and that your company has an expected rate of return of 16%. If all that is correct, what is the "beta" on your company? Show your work.
Beta = ____________________________
(b) You observe another company in your city (GammaCo). Your consultant tells you that GammaCo has a "Beta" of 0.85. What must be the expected return on GammaCo in order for the market to be in equilibrium? Show your work.
Expected Return = ______________________
Related Book For
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date: