Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need correct answer only. Q2. You have run a regression of monthly stock returns for Gym Place Holdings, a small play- set manufacturing company against

Need correct answer only.

image text in transcribedimage text in transcribed
Q2. You have run a regression of monthly stock returns for Gym Place Holdings, a small play- set manufacturing company against the S&P 500 over the last 5 years. The results are summarized below: Returns = 0.05% + 2.00 Returns R2 (0.32) =30% a. If you know that this stock had a monthly Jensen's alpha of 0.30% during the period of the regression, what was the annualized riskfree rate during the last 5 years? b. Assume now that you have been asked to estimate a Euro cost of equity for Gym Place Holdings for its European holdings, primarily in France and Germany. The 10-year U.S. Treasury bond rate is 3.9%, the German government Euro bond rate is 4.4% and Gym Place can borrow money at 6% (in Euros). The risk premium (Equity over riskfree rate) over the last 10 years in European markets is only 2% but the historical risk premium over the last 75 years in the United States is 4.53%. Estimate a Euro cost of equity for Gym Place Holdings.Assume a perfectly competitive market demand where MWTP (q ) = 75 - Q and MC (Q) = Q + 10. If the government imposes a per-unit tax oft=5 which the buyer pays. What is market price? Enter a number only, no $ sign

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Accounting

Authors: Leslie Breitner, Robert Anthony

11th Edition

0132744376, 978-0132744379

More Books

Students also viewed these Accounting questions

Question

Always have the dignity of the other or others as a backdrop.

Answered: 1 week ago