Corporate Investment and Financing, business and finance homework help

Oct 6th, 2016
Steve1995
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Question description

Two variables or inputs into the application of the Capital Asset Pricing Model to determine the cost of equity for a company are the market risk premium and the beta for the company.  Wal-Mart currently has a beta of .31.  Please give one reason you believe this could be too low or too high.

Two variables or inputs into the application of the Capital Asset Pricing Model to determine the cost of equity for a company are the market risk premium and the beta for the company.  Please give (and then support) what you believe the current market premium to be.

CAN BE VERY SHORT ANSWERS! (can give example of answer once chosen)

Tutor Answer

(Top Tutor) Daniel C.
(997)
School: Carnegie Mellon University
PREMIUM TUTOR

Hello friend, please find the attached.

1

Capital Asset Pricing Model.

Capital Asset Pricing Model.
Institution Affiliation:
Date:

Capital Asset Pricing Model.

2

If Wal-Mart currently has a beta of .31, Please give one reason you believe this could be
too low or too high.

In Capital Asset Pricing Model, beta is the measure of the market risk. Since the
higher the correlation between the market and the security brings out the meaningfulness...

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