Case: Analyzing Risk and Return on Chargers Products Investments Justin Winner, a financial analyst for Chargers Products, a manufacturer of stadium benches, must evaluate the risk and return of two assets, X and Y. The firm is considering adding these assets to its diversified asset portfolio. To assess the return and risk of each asset, Junior gathered data on the annual cash flow and beginning and end-of-year of each asset over the immediately preceding 10 years 1997-2006. These data are summarized in the table below. Justin's investigation suggests that both assets, on average, will tend to perform in the future just as they have during the past 10 years. He, therefore, believes that the expected annual return can be estimated by finding the average annual return for each asset over the past 10 years. Justin believes that each asset's risk can be assessed in two ways: in isolation and as part of the firm's diversified portfolio of assets. The risk of the assets in isolation can be found using the standard deviation and coefficient of variation of returns over the past 10 years. The capital asset pring model (CAPM) can be used to assess the asset's risk as part of the firm's portfolio of asset's risk as part of the firm's portfolio of assets. Applying some sophisticated quantitative techniques, Justin estimated betas for assets X and Y of 1.60 and 1.10, respectively. In addition, he found that the risk-free rate is currently 7% and that the market return is 10%