What is beta of Asset X if the expected return on Asset X is 14%, the expected market return is 10%, and the risk free rate is 6%? Select one: a. 1.00 b. 2.00 c. 0.67 d. 1.33
An investment project costs $20,000 and will generate $5,000 in annual cash flows for three years followed by $4,000 in annual cash flows for six years. What is the payback period?
Select one:
a. 4.67 years
b. 4.25 years
c. 4.50 years
d. 5.33 years
1.
Expexted return on asset = Rfr + B*(Expected market return - Rfr)
14% = 6% + B (10% - 6%)
B = 2
Ans: Option B
2. Payback period = Number of years to cover the total investment
Total investment =$20,000
Ist three years = 15,000 (5000* 3 years)
4th Year = $4000
Still we need $1000 to cover the total investment
Now Period = 1000/4000 = 0.25 year
Total year = 4.25 year
Option B
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