Risk Swan's Sportswear plans to launch a line of designer jeans with the help of one well-known designer. Because of the highly competitive nature of the industry, theline of jeans has been given a code name, Stretch. Swan's market research has established a forecast shown in the following table. E. Use the table to calculate theaverage return for the line.The average return for the line is%. (Enter as a percentage and round to two decimal places.)(Click on the icon here a in order to copy the contents of the data table belowinto a spreadsheet.)Market acceptance ProbabilityVery poorAnnual rate of return0.08- 0.017Poor0.190.0390.460.074ageGood0.180.115Excellent0.090.166 Interpreting beta A firm wishes to assess the impact of changes in the market return on an asset that has a beta of 1.1.a. If the market return increased by 17%, what impact would this change be expected to have on the asset's return?b. If the market return decreased by 5%, what impact would this change be expected to have on the asset's return?c. If the market return did not change, what impact, if any, would be expected on the asset's return?d. Would this asset be considered more or less risky than the market?a. If the market return increased by 17%, the impact on the asset's return is%. (Round to one decimal place. Enter a negative percentage number if the asset return decreases.)b. If the market return decreased by 5%, the impact on the asset's return is%. (Round to one decimal place. Enter a negative percentage number if the asset retum decreases.)c. If the market return did not change, the impact on the asset's return is %. (Round to one decimal place. Enter a negative percentage number if the asset return decreases.)d. Would this asset be considered more or less risky than the market? (Select from the drop-down menus.)The asset isthe market portfolio, which has a beta of

Average Return: The average return is computed by summing the product of the security probability…

Answered: The average return for the line is %.…

Business

Finance

The average return for the line is %. (Enter as a percentage and round to two decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are going to value Lauryn's Doll Company using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.5, a debt-to-equity ratio of 0.3, and a tax rate of 21 percent. Based on this information, what is the asset beta for Lauryn's? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. > Answer is complete but not entirely correct. Lauryn's asset beta 1.86 X
A prospective MBA student would like to examine the factors that impact starting salary upon graduation and decides to develop a model that uses program per-year tuition as a predictor of starting salary. Data were collected for 37 full-time MBA programs offered at private universities. The data are stored in the accompanying table. The least-squares regression equation for these data is Y₁ = - 13,863.426 +2.437X, and the standard error of the estimate is Syx = 15,910.578. Assume that the straight-line model is appropriate and there are no serious violations the assumptions of the least-squares regression model. Complete parts (a) and (b) below Click the icon to view the data on program per-year tuition and mean starting salary a. At the 0.01 level of significance, is there evidence of a linear relationship between the starting salary upon graduation and program per-year tuition? Determine the hypotheses for the test. Ho B₁ = D H₁ P₁ #0 (Type integers or decimals. Do not round.)…
Maximus Steel plans to introduce one of three new products code-named: Wren, Hawk, and Nightingale. The marketing department indicated that the success of any product depends on the market conditions (Favorable, Neutral, or Unfavorable). The profit the company will earn also depends on the market conditions. The table below shows the probability estimated for each market condition and the profits Maximus Steel will realize within those conditions: Product Code Market Conditions Favorable P = 0.2 Neutral P = 0.7 Unfavorable P = 0.1 Wren $120,000 $70,000 ($30,000) Hawk $60,000 $40,000 $20,000 Nightingale $35,000 $30,000 $30,000 Part 1 Instructions: Compute the expected value for each alternative. What is the best option for the company?
You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.5, a debt-to-equity ratio of .4, and a tax rate of 21 percent. Based on this information, what is the asset beta for Lauryn's? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Lauryn's asset 1.22 x beta
The Paymore Rental Car Agency rents cars in a small town. It wants to determine how many rental cars it should maintain. Based on market projections and historical data, the manager has determined probability distributions for the number of rentals per day and rental duration (in days only) as shown in the following tables: Number of customers per day Probability 0 .20 1 .20 2 .50 3 .10 Rental duration in days Probability 1 .10 2 .30 3 .40 4 .10 5 .10 Design a simulation experiment for the car agency and simulate using a fleet of four rental cars for 10 days. Compute the probability that the agency will not have a car available upon demand. Should the agency expand its fleet? Explain how a simulation experiment could be designed to determine the optimal fleet size for the Paymore Agency. Use the following random numbers in order (from left to right) for the simulation of number of customers per day: 0.62 0.48 0.96 0.86 0.86 0.29 0.79 0.22 0.08 0.62…
Tou have observed the cumulative abnormal returns graphed below surrounding the announcement of a new CEO for all publicly traded frms in the US from 1990 to 2020. The average CAR is plotted relative to the event date (0 on the higure). Chart A uses the CAPM to calculate expected returns Chart Buses the Fama-French 3-factor Model to calculate expected returns. Based on this evidence, what can we conclude about market efficlency Chart A Chart B 4.00% 5.00% 3.00% 4,00% 3,00% 200% 200% 1.00% 1.00% 0.00% 0.00% -12 -8 -4 8. 12 -12 -8 -4 4. 8 12 O Looking at Chart A, we can conclude that the market is definitely efficient, because there is no change in CAR after the event O Looking at Chart B, we can conclude that the market is definitely inefficient, because the CAR continues to increase after the event We can conclude nothing about efficiency because of the joint-hypothesis problem We can conclude both a. and b. are true
You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.7, a debt-to-equity ratio of 0.7, and a tax rate of 20 percent. Based on this information, what is the asset beta for Lauryn's? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Lauryn's asset beta
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2015. Also assume that the firm's equity beta is 1.40, the risk-free rate is 2.05 percent, and the market risk premium is 6.1 percent. Dividends per share Return on equity Book value per share 2015 value per share Average price multiple Forecasted growth rate Using P/E ratio Using P/CF ratio Using P/S ratio $ 2.28 8.50% $17.15 Share price Earnings Cash Flow $ 5.20 $6.70 13.30 9.48 13.52 11.518 Using the P/E, P/CF, and P/S ratios, estimate the 2016 share price for Beagle Beauties. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Sales $25.75 2.44 7.461
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2021. Also assume that the firm's equity beta is 1.30, the risk-free rate is 2.55 percent, and the market risk premium is 7.0 percent. Dividends per share. Return on equity Book value per share 2021 value per share. Average price multiple Forecasted growth rate $ 2.22 9.50% $18.40 Share price Earnings $ 5.00 13.10 13.57% Cash Flow $ 6.50 9.51 11.32% Sales $25.65 2.45 7.17% The sustainable growth rate is 5.282 percent, and the required return is 11.65 percent. Use the clean surplus relationship to calculate the share price for Beagle Beauties with the residual income model. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2021. Also assume that the firm's equity beta is 1.20, the risk-free rate is 2.15 percent, and the market risk premium is 5.0 percent. Dividends per share Return on equity Book value per share 2021 value per share Average price multiple Forecasted growth rate $ 2.06 Using PE ratio Using P/CF ratio Using P/S ratio 7.50% $ 17.20 Earnings $ 5.00 13.10 Share Price 13.49% Cash Flow $6.60 9.43 11.40% Sales $25.65 2.37 Using the PE, P/CF, and P/S ratios, estimate the 2022 share price for Beagle Beauties. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. 7.15%
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year - end 2021. Also assume that the firm's equity beta is 1.40, the risk - free rate is 2.60 percent, and the market risk premium is 8.0 percent. Dividends per share $ 2.44 Return on equity 10.50% Book value per share $ 20.05 Earnings Cash Flow Sales 2021 value per share $ 5.00 $ 6.40 $ 25.65 Average price multiple 13.10 9.62 2.56 Forecasted growth rate 13.68% 11.21% 7.39% Using the PE, P/CF, and P/S ratios, estimate the 2022 share price for Beagle Beauties. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. DO NOT USE EXCEL please leave a key for the formula thank you
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2021. Also assume that the firm's equity beta is 1.20, the risk-free rate is 2.65 percent, and the market risk premium is 7.0 percent. Dividends per share Return on equity Book value per share 2021 value per share Average price multiple Forecasted growth rate $ 2.26 9.50% $ 18.70 Earnings $ 5.00 Cash Flow Sales $ 6.30 $ 25.65 13.10 9.53 2.47 13.59% 11.30% 7.23% Using the PE, P/CF, and P/S ratios, estimate the 2022 share price for Beagle Beauties. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Using PE ratio Using P/CF ratio Using P/S ratio Share Price

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