Case Study (Corporate Finance) Hi, kindly help me with a step by step solution to the case study questions. Junior Sayou, a financial analyst for

Case Study (Corporate Finance)

Hi, kindly help me with a step by step solution to the case study questions.

Junior Sayou, a financial analyst for Chargers Products, a manufacturer of stadium benches, must evaluate the risk and return of two assets, X and Y. The firm is considering adding these assets to its diversified asset portfolio. To assess the return and risk of each asset, Junior gathered data on the annual cash flow and beginning-and end-of-year values of each asset over the immediately preceding 10 years, 2006-2015. These data are summarized in the attached table. Junior’s investigation suggests that both assets, on average, will tend to perform in the future just as they have during the past 10 years. He, therefore, believes that the expected annual return can be estimated by finding the average annual return for each asset over the past 10 years.

Junior believes that each asset’s risk can be assessed in two ways: in isolation and as part of the firm’s diversified portfolio of assets. The risk of the assets in isolation can be found by using the standard deviation and coefficient of variation of returns over the past 10 years. The capital asset pricing model (CAPM) can be used to assess the asset’s risk as part of the firm’s portfolio of assets. Applying some sophisticated quantitative techniques, Junior estimated betas for assets X and Y of 1.60 and 1.10, respectively. In addition he found that the risk-free rate is currently 7.0% and that the market return is 10.0%.

Respond to the following:

  1. Calculate the annual rate of return for each asset in each of the 10 preceding years, and use those values to find the average annual return for each asset over the 10-year period.
  2. Use the returns calculated in part 1 to find (a) the standard deviation and (b) the coefficient of variation of the returns for each asset over the 10-year period.
  3. Use your findings in part 1 and 2 to evaluate and discuss the return and risk associated with each asset. Which asset appears to be preferable? Explain

Thank you

Solution:Rate of Return for Assets X and Y in each of the 10 preceding yearAsset X Year Cashflow Beginning Ending Rate ofreturn 2006 1,000 20,000 22,000 15.00% 2007 1,500 22,000 21,000…

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more