Answer:
Holding period return = 14.49%, Standard Deviation = 11.08 approx
Explanation:
Eco Scenario    Dividend     Stock Price  HPR    Prob     Expected HPR
Boom                         3                 60         26        0.33        8.58
Normal                       1.2               58        18.4       0.33       6.072
Recession                  0.75            49        (0.5)      0.33      <u> (0.165)</u>
               Expected HPR                                                        14.49%
<u>Calculation Of Standard Deviation</u>
                                       (A)                     (B)           (A) - (B)   
 
           
        Given return   Exp return       d          p
       Given return   Exp return       d          p           
60        50      3            26                     14.49         11.51       0.33      43.718    
58        50      1.2          18.4                   14.49         3.91       0.33      5.045
49        50      0.75      (0.5)                    14.49        14.99     0.33      <u> 74.15</u>
                                                                                          Total  =  122.91
 =  122.91
wherein, d = deviation
                p = probability 
                Standard Deviation =  =
  =  = 11.08
 = 11.08  
<u></u>
<u>Working Note</u>:
Holding period return = 
Boom =  = 26%
   = 26%
Similarly, for normal =  = 18.4%
  = 18.4%
Recession =  = (0.5)%
  = (0.5)%
figure in bracket indicates negative return
 
        
             
        
        
        
Answer:
True
Explanation:
According to Thomas Duening and Robert Hisrich book "Technology Entrepreneurship: Taking Innovation to the Marketplace", the direct purchase has some problems: long-term capital gain to the seller and double taxation. The bootstrap purchase eliminates those problems: the acquiring company can acquire a small amount of the firm, 20 or 30% in cash and the remaining with a long-term note. 
 
        
             
        
        
        
Answer:
The calculations are shown below:
Explanation:
The calculations are shown below:
a. The expected rate of return is  
Return = Risk free return + Beta × (Market return - risk free return)
= 5% + 1.9 ×  (11.20% - 5%)
= 5% + 11.78%
= 16.78%
b. Now the alpha is 
Alpha = Actual rate of return - Expected rate of return 
          = 9.2% - 16.78%
          = - 7.58%
c. No , the CAPM is not valid as the expected rate of return is more than the actual rate of return