Why should stock betas and expected returns be related, while no such relationship exists between stock standard deviations and expected returns?
Answer to relevant QuestionsWhy is the risk-based approach the best method for estimating stocks expected return? Refer to Figure and answer the following questions. a. What return would you expect on a stock with a beta of 2.0? b. What return would you expect on a stock with a beta of 0.66? c. What determines the slope of the line in ...What factors account for the popularity of the pay-back method? In what situations is it often used as the primary decision- making technique? Why? In almost every example so far, firms must decide to invest in a project immediately or not at all. But suppose that a firm could invest in a project today or it could wait one year before investing. How could you use NPV ...Why is using the cost of equity to discount project cash flows inappropriate when a firm uses both debt and equity in its capital structure?
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