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a. For each matched pair of industries, describe factors that characterize a typical fin's business model in each industry. Describe how such factors would contribute to differences in systematic risk.

b. For each matched pair of industries, use the CAPM to compute the required rate of return on equity capital for the median finrn in each industry. Assume that the risk free rate of return is 4.0 percent and the market risk premium is 5.0 percent.

c. For each matched pair of industries, compute the present value of a stream of SI dividends for the median firm in each industry. Use the perpetuity-with-growth model and assume 3.0 percent loos.= growth for each industry. What effect does the difference in systematic risk across industries have on the per dollar dividend valuation of the median firm in each industry?

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Management Theories, Management Studies

Category:- Management Theories
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