= = KRF + (KM.KRE) b 8% + (15%-8%) b, = 8% + (7%)b, Here, risk-adjusted...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
= = KRF + (KM.KRE) b 8% + (15%-8%) b, = 8% + (7%)b, Here, risk-adjusted discount rate appropriate for the i th project k = KRF = risk-free rate of interest; Fay uses 8 percent based on U.S. Treasury bond yields. KM = expected return on the market." Fay uses an historical figure of 15 percent. b₁ = beta coefficient of the ith project; these values must be subjectively estimated. The World Bank analysts estimated the beta coefficients for each project as follows: Beta Coefficient 2.50 3.25 3.00 2.75 3.00 Project A B с Oil Project Alaska Oil's overall beta (with the market) is 1.143. Given this information, calculate the risk-adjusted discount rates for Alaska Oil, the oil exploration project, and Projects B and D. For Projects A and C, the values are 25.5 and 29 percent respectively. Note that Alaska Oil's own bet was calculated without regard to the effects of any of these projects = = KRF + (KM.KRE) b 8% + (15%-8%) b, = 8% + (7%)b, Here, risk-adjusted discount rate appropriate for the i th project k = KRF = risk-free rate of interest; Fay uses 8 percent based on U.S. Treasury bond yields. KM = expected return on the market." Fay uses an historical figure of 15 percent. b₁ = beta coefficient of the ith project; these values must be subjectively estimated. The World Bank analysts estimated the beta coefficients for each project as follows: Beta Coefficient 2.50 3.25 3.00 2.75 3.00 Project A B с Oil Project Alaska Oil's overall beta (with the market) is 1.143. Given this information, calculate the risk-adjusted discount rates for Alaska Oil, the oil exploration project, and Projects B and D. For Projects A and C, the values are 25.5 and 29 percent respectively. Note that Alaska Oil's own bet was calculated without regard to the effects of any of these projects
Expert Answer:
Answer rating: 100% (QA)
Here are the steps to calculate the riskadjusted discount rates for each project 1 Alaska Oil kI ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these accounting questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
3. (15 pts.) The random variables X and Y have joint density function fxx(x, y) x-?y?, x > 1, y > 1. Compute the cdf and pdf of the random variable U = XY.
-
Carlson Sound builds innovative speakers for home theater systems. Identify the following costs as variable or fixed: a. Depreciation on equipment used to cut wood enclosures b. Wood for speaker...
-
Describe the eight step communication process in detail. Once you've written a detailed description of the steps, draft out a rough idea showing a piece of communication going through the process.(...
-
Which item(s) appears as a reconciling item(s) to the bank balance in a bank reconciliation? a. Outstanding checks b. Deposits in transit C. Both a and b d. None of the above
-
Target Corporation prepares its financial statements according to U.S. GAAP. Targets financial statements and disclosure notes for the year ended February 3, 2018, are available in Connect. This...
-
4. Garage Specialty Corporation manufactures joint products P and Q. During a recent period, joint costs amounted to P80,000 in the production of 20,000 gallons of P and 60,000 gallons of Q. Garage...
-
Senior Home Living (SHL) is a Canadian-based corporation located in British Columbia. SHL provides senior living residences across Canada. The company was incorporated in 1975, and has been...
-
Click on the link below, and watch the video: https://www.brighttalk.com/webcast/13481/573102?utm_source=brighttalk-portal Explain through a short rationale the content. Explain what the content...
-
Discuss the changing role of China in the world economy. Does Chinas rise help or hurt people in developed countries? What about people in other emerging markets?
-
True or False. The equivalent mass of several masses at different locations can be found using the equivalence of kinetic energy.
-
What semiannual interest rate is required to produce an effective annual yield of 7.4%?
-
Discuss North America as a major marketplace and business center in the world economy.
-
In vibration analysis, can damping always be disregarded?
-
which 3 statements are true about journal entries? Which 3 statements are true about journal entries? (Select all that apply) Total debits must equal total credits You can post to Products and...
-
Find the center of mass of a thin triangular plate bounded by the y-axis and the lines y = x and y = 2 - x if (x, y) = 6x + 3y + 3.
-
Mark owns his home and has a $250,000 mortgage related to his purchase of the residence. When his daughter went to college in the fall of 2012, he borrowed $20,000 through a home equity loan on his...
-
In the 2012 tax year, Michelle paid the following amounts relating to her 2010 tax return: Tax deficiency..........................................$5,000 Negligence...
-
Patty Bayan is a single taxpayer living at 543 Space Drive, Houston, TX 77099. Her Social Security number is 466-33-1234. For 2012, Patty has no dependents, and her W-2 from her job at a local...
-
Derive Maxwell's relations.
-
A spherical balloon of \(1 \mathrm{~m}\) diameter contains a gas at \(120 \mathrm{kPa}\). The gas inside the balloon is heated until the pressure reaches \(360 \mathrm{kPa}\). During heating the...
-
(a) State and prove Clausius inequality theorem. (b) Nitrogen is compressed from an initial state of 1 bar and \(25^{\circ} \mathrm{C}\) to a final state of \(5 \mathrm{bar}\) and \(25^{\circ}...
Study smarter with the SolutionInn App