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Please answer study questions. Need back as soon as possible 18. Suppose Pepsico's stock has a beta of 0.57. If the risk-free rate is 3%
Please answer study questions. Need back as soon as possible
18. Suppose Pepsico's stock has a beta of 0.57. If the risk-free rate is 3% and the expected return of the market portfolio is 8%, what is Pepsico's equity cost of capital? Pepsico's equity cost of capital is _____? (Round to two decimal places.) 19. Suppose all possible investment opportunities in the world are limited to the five stocks listed in the table: Stock Price/Share ($) Number of Shares Outstanding (millions) A B C D E 10 20 8 50 45 10 12 3 1 20 . What does the market portfolio consist of (what are the portfolio weights)? Enter the percentage that each stock makes up of the total portfolio. (Round to two decimal places.) _____________Stock__________________Portfolio Weight A ________% 20. You need to estimate the equity cost of capital for XYZ Corp. You have the following data available regarding past returns: Year Risk-free Return 201 4% 1 201 1% 2 Market Return XYZ Return 6% 8% 41% 44% . a. What was XYZ's average historical return? b. Compute the market's and XYZ's excess returns for each year. Estimate XYZ's beta. c. Estimate XYZ's historical alpha. d. Suppose the current risk-free rate is 4%, and you expect the market's return to be 9%. Use the CAPM to estimate an expected return for XYZ Corp.'s stock. e. Would you base your estimate of XYZ's equity cost of capital on your answer in part (a) or in part (d)? a. What was XYZ's average historical return? XYZ's average historical return was ____? (Round to one decimal place.)Step by Step Solution
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