Email from Analyst Email from Accounting Manager X 18 To: Maud Hemingway, Accountant To: Maud Hemingway, Accountant From: Beth Nolan, Analyst From: Mark Randall, Accounting Manager RE: Valuation Metrics RE: Valuation Estimates close all EXHIBITS exhibits Hi Maud, Hi Maud, Email from Analyst Email from Accounting Manager Per your request, I have gathered the following metrics for valuing our stock and To calculate the expected return from our stock and bond, please use the bond: following assumptions: States of Economy Treasury bill rate 0.4% 1. Bonds are issued at par regardless of the state of economy. Company beta 1.1 2. The bond coupon rate is 1.5% higher than the treasury bill rate when the economy is normal. Based on the information provided in the exhibits, enter the appropriate amounts in the associated Please contact me if you have further questions. 3. During recession, the bond coupon rate would be 15% higher than when cells. Round interim calculations and final results to the nearest hundredth. the economy is normal. During expansion, the bond coupon rate would Regards, be 10% lower than when the economy is normal. Beth 4. Market rate for stock is 3.2% when the economy is normal, 4.2% during Stock Bond expansion, and 2.4% during recession. X 1. Rate of return during recession (%) 123 States of Economy Thank you, Mark Probability 2. Rate of return when the economy is normal (%) 123 125 State of Economy Recession 20% 3. Rate of return during expansion (%) 123 Normal 50% 4. Expected return (%) 123 123 Expansion 20% 5. Standard deviation (%) 123 123 6. Coefficient of variance 123