Security A has a 9% expected return, 65% standard deviation. Security B has a 7% return, 50% standard deviation.

a. Using standard deviation data alone, which security is considered more risky?

b. Using co-efficient of variation as your sole analysis, which is the best choice of Security?

c. How would you explain co-efficient of variation?

You are looking at investing in SML Industries stock. Risk free rate is 2%, rm is 11%, Beta is 1.2. Growth is 4%. Do is $3.00. Current price is $75

a. Using CAPM, what is the required return?

b. Using constant growth valuation, what is the expected return?

c. Should I buy this stock?

You have been asked to analyze the following potential project. The expected cash flow stream is $20,000 for year 1 with an expected 4% growth rate per year for the next 3 years.

a. If your cost of capital is 10%, how much would you be willing to invest in this 4 year project?

b. if the upfront cost of the project was $70,000, should you say yes to the project?