Question
You have run a regression of monthly returns on TXBT, a large biotechnology firm, against monthly returns on the S&P 500 index, and come up
You have run a regression of monthly returns on TXBT, a large biotechnology firm, against monthly returns on the S&P 500 index, and come up with the following output
Rstock= 2.11% + 2.24 x Rmarket
R2= 0.5
The current one-year Treasury bill rate is 1.2 and the current thirty-year bond rate is 6.5%. The firm has 227 million shares outstanding, selling for $29.95 per share. The short term equity risk premium is 5.6 and the long term equity risk premium is 6.6. What is the expected return on this stock for a thirty year capital budgeting project?
(Answer Format to two decimal places with NO PERCENT SIGN, for example, for three percent put: 3.00)
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