Security A has a 9% expected return, 65% standard deviation. Security B has a 7% return, 50% standard deviation.
a. Using standard deviation data alone, which security is considered more risky?
b. Using co-efficient of variation as your sole analysis, which is the best choice of Security?
c. How would you explain co-efficient of variation?
You are looking at investing in SML Industries stock. Risk free rate is 2%, rm is 11%, Beta is 1.2. Growth is 4%. Do is $3.00. Current price is $75
a. Using CAPM, what is the required return?
b. Using constant growth valuation, what is the expected return?
c. Should I buy this stock?
You have been asked to analyze the following potential project. The expected cash flow stream is $20,000 for year 1 with an expected 4% growth rate per year for the next 3 years.
a. If your cost of capital is 10%, how much would you be willing to invest in this 4 year project?
b. if the upfront cost of the project was $70,000, should you say yes to the project?