Question
The management of Ark Industries wants to analyze the performance of the companys stock in the stock market. They want to compare the stock performance
The management of Ark Industries wants to analyze the performance of the companys stock in the stock market. They want to compare the stock performance with Apex Inc, a strong competitor in the industry, and the market index. The following data is available for managerial finance analysis.
| Ark Industries |
| Apex Incorporated | Market Index | ||||
| Year | Capital gain/loss | Dividend | Purchased Price | Capital gain/loss | Dividend | Purchased price | Rate of Return |
| 2020 | $6.79 | $2.23 | $23.53 | $5.80 | $3.52 | $79.32 | 51.8% |
| 2019 | -$5.08 | $2.65 | $28.61 | $5.00 | $3.65 | $74.32 | 1.30% |
| 2018 | $13.40 | $2.73 | $15.21 | -$12.80 | $3.45 | $87.12 | 11.90% |
| 2017 | $2.58 | $2.57 | $12.63 | -$8.00 | $3.47 | $95.12 | 13.90% |
| 2016 | -$0.58 | $2.23 | $13.21 | $10.88 | $3.55 | $84.25 | 15.80% |
Question-- Ark Industries Inc. wants to estimate its beta. The following information is available:
| Risk-free rate | 5.0% |
| Market rate of return | 10.0% |
| Expected rate of return | 12.0% |
i. Calculate the beta for Ark Industries.
ii. If Ark Industries beta were 2.0, then what would be its new required rate of return?
(Note: I could not find this answer in chegg yet. Please dont post same answer from similar question.)
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Handbook Of The Economics Of Finance Volume 2A
Authors: George M. Constantinides, Milton Harris, Rene M. Stulz
1st Edition
