Identify a sample of food companies. For example, you could try Campbell Soup (CPB), General Mills (GIS),

Question:

Identify a sample of food companies. For example, you could try Campbell Soup (CPB), General Mills (GIS), Kellogg (K), Mondelez International (MDLZ), and Tyson Foods (TSN).

a. Estimate beta and R² for each company, using five years of monthly returns and Excel functions SLOPE and RSQ.

b. Average the returns for each month to give the return on an equally weighted portfolio of the stocks. Then calculate the industry beta using these portfolio returns. How does the R² of this portfolio compare with the average R² of the individual stocks?

c. Use the CAPM to calculate an average cost of equity (requity) for the food industry. Use current interest rates—take a look at the end of Section 9-2—and a reasonable estimate of the market risk premium.

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Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...

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