Dr. Dan is considering investing in a project with beta coefficient of 1.75. What would you recommend him to do if this investment has an 11.5 percent rate of return, the risk-free rate is 5.5 percent, and the rate of return on the market portfolio of assets is 8.5 percent?
What will be an ideal response?
r = RF + b(rm - RF)
= 0.055 + 1.75(0.085 - 0.055) = 0.108 = 10.75%
Dr. Dan should invest in the project because the project's actual rate of return (11.5 percent) is greater than the project's required rate of return (10.8 percent).
You might also like to view...
The most frequently used graphic in reports is the table. ?
Indicate whether the statement is true or false
Bradley Technologies opened a branch office in Taiwan a year ago. Vice President Joseph Milhouse, of International Operations, is based in Chicago, and he has selected Bill Smythe, his top subordinate in Chicago, to head up the new office. Joseph is now disappointed that the Taiwan operation was not thriving yet; Bill had just not been successful in developing relationships with potential clients. Joseph wondered if, instead of sending a(n) ________ from the United States to lead the office, he should have heeded the advice of his Taiwanese agent, who had recommended that Joseph hire a native Taiwanese to lead the office.
A. host-country national B. inpatriate C. expatriate D. second-country national E. third-country national
Contractual duties are assignable
Indicate whether the statement is true or false
Another name for the reinvestment ratio is the ________ ratio
A) acid test B) retention C) payout D) plowback