公司理财第12章.docVIP

Chapter 12: Risk, Return, and Capital Budgeting Concept Questions - Chapter 12 12.1( What is the disadvantage of using too few observations when estimating beta? Small samples can lead to inaccurate estimations. ( What is the disadvantage of using too many observations when estimating beta? Firms may change their industries over time making observations from the distant past out-of-date. ( What is the disadvantage of using the industry beta as the estimate of the beta of an individual firm? The operations of a particular firm may not be similar to the industry average. 12.2( What are the determinants of equity betas? The responsiveness of a firms revenues to economy wide movements. The degree of a firms operating leverage. The degree of a firms financial leverage. ( What is the difference between an asset beta and an equity beta? Financial leverage. 12.6( What is liquidity? Liquidity in this context means the cost of buying and selling stocks. Those stocks that are expensive to trade are considered less liquid. What is the relation between liquidity and expected return? There is a high expected return for illiquid stocks with high trading costs. What is adverse selection? Adverse selection occurs when individuals have ignorance about traits, trends, or other information hidden in a population. For instance, a trader may suffer from adverse selection if certain market knowledge is hidden from him but is available to some investors. What can a corporation do to lower its cost of capital? A corporation can be proactive in taking actions that will lower trading costs, thereby lowering its cost of capital. Answers to End-of-Chapter Problems 12.1 Cost of equity RS = 5 + 0.95 (9) = 13.55% NPV of the project = -$1.2 million + = -$20,016.52 Do not undertake the project. 12.2 a. = (-0.05 + 0.05 + 0.08 + 0.15 + 0.10) / 5 = 0.066 = (-0.12 + 0.01 + 0.06 + 0.10 + 0.05) / 5 = 0.02 b. - - ( -)2 ( -)( -) -0.116 -0.14 0.0196 0.01624 -0.016