The sales forecast is often the starting point of the budgeting process. Identify and discuss key assumptions that are made in the creation of the sales forecast. How would you defend these assumptions when presenting your budget to the budget committee?
20. Suppose you observe the following situation:
Security Beta Expected Return
Peat Co. 1.20 11.6
Re-Peat Co. .70 9.8
Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Expected return %
Risk-free rate %