How to calcualte the market rate of return and risk premium inorder to calculate cost of equity of a company?
951928
use the CAPM (capital asset pricing) model to determine the cost of equity...\n\ncost of equity = risk free rate + beta of stock*(expected mkt return - risk free rate)\n\nremember that the "(expected mkt return - risk free rate)" part of the equation is the "market risk premium".\n\nand to calculate market risk premium is one of the biggest debates in finance!  The valuation book put out by McKinsey says to use the historical market risk premium of 5%\n\ngood luck!
913689
Add additional details to your question and I may be able to answer it.  I assume you are looking for the expected value, but some of you data is missing.\nE(X) = .7(175000) + .3(-amount of the loss)
1168169
Goose is right. The formula is:\n\nFV = P x e^(r x y) \n\nwhere FV = Future Value; P is your principal, r is the annual interest rate and y is the number of years of continuous compounding and e = lim(n-->inf) of (1+1/n)^n\n= 2.7182818.(about)\nHere's link which explains it quite well and also has a periodic/continuous calculator to fool around with.\n\nhttp://www.moneychimp.com/articles/finworks/continuous_compounding.htm
313319
It's been so long since I did ratios, I don't know if I remember them exactly...but I think current ratio is 2.5 ($40,000 current assets / $16,000 current liabilities), debt to equity would be 0.75 (Current liabs plus long term liabs = $60,000 / $80,000 equity), return on equity would be 9% ($7,200 / $80,000).  Hope you are just using these as check figures!!!
398175
take historical closing prices from the stock you want to calculate the beta depending on your time frame of work. then take the historical closing price of the S&P 500 in the same period. Download it to a spreadsheet or excel.\nCalculatethe daily return (price 2-price 1)/price 1 on the stock and the S&P. Go to excel and execute a linear regression between the two subset of values.\nVoila you will have a equation stock return = alpha + beta(s&p return).\n\nIf you want to make it more complicated you can go to the CPM model and use the risk-free interest rate, but there is little use about it. At the end, you believe whatever Valueline, bloomberg is telling you.
130902
If you Google for\n\ncalculate IRR\n\nyou will find a site that lets you calculate IRR's online.  Near the top of the list was:\n\nhttp://www.datadynamica.com/irr.asp\n\nPutting in\n\n1. -500\n2. 200\n3. 200\n4. 200\n\nit said the internal rate of return was\n\n9.7010%
980436
The market risk premium is the same for every company. Usually between 4% and 7%. The beta changes to adjust for security risk.
468760
Assets = liabilities + equity\n\nThis formula works because a firm will have certain assets, and anything that they don't owe is value for the shareholders.\n\nFor example, on a company with pure cash of 10 dollars.  If the liabilities are 5 dollars, then the leftover 5 is value to the person who owns the company.  Theoretically, if the company got sold at 100% efficiency, there would be 5 dollars left, so the owners have a total value of that 5 dollars.
919781
No.  The formula is much more complex.  For a two-asset portfolio, the variance of the portfolio, vp, will be a function of the proportions invested in the assets (x1 and x2), their return variances (v1 and v2), and the covariance between their returns (c12):\n\nvp = ((x1^2)*v1) + (x2^2)*v2) + 2*x1*x2*c12 \n\nWith 20 assets, the formula will be even more confusing (about 20 times so).  \n\nYou need to employ an alternative strategy.  Build a time series of your portfolio value, compute periodic changes in that value, and calculate standard deviation of that change.
565111
I think you are looking for the P/E.  Divide the price of the stock by earnings per share.  You'll get the same answer if you divide the market value of the company by the total earnings (rather than EPS).  \n\nMarket value / EPS doesn't make sense.
547680
I guess you need this for stock market prices?\n\nLet R_i be the daily price variations in percent.\nM = average of R_i \nVar = average of ( (R_i - M)^2 )\nSD = square root of Var
889234
let x be the amt invested in stocks\nlet y be the amt in bonds\n.06x is amt annually from stocks\n.03y is amt annually from bonds\n.06x +.03y = 975\nx+y=18000\nsubstitution method x = 18000-y\n.06(18000-y) +.03y =975....distribute\n1080-.06y +.03y =975....combine like terms\n1080-.03y =975.....-1080\n-.03y = -105.....divide by -.03\ny = 3500\n18000-3500=x =14500\n3500 in bonds and 14500 in stocks\n\ncheck in words\n3500*.03 =105\n14500*.06=870\n870+105=975
484393
What you are looking for is called the Sharpe ratio:\n \nSharpe ratio = (return - risk free rate) / risk\n\nIt is explained best here:\nhttp://www.moneychimp.com/articles/risk/sharpe_ratio.htm
924015
http://finance.yahoo.com/q/hp?s=DIS
607557
assets = liabilities + owner's equity\n\nA = L + E
315028
NPV lets you know whether a project is feasible or not at a certain % of interest rate.\n\nSay your funds cost you x%, you can assess whether your project gives you enough returns to meet your financial costs based on the returns (cash inflows) you get at various points of time in the future.\n\nIf your NPV is zero, \n==> Your returns = Your financial costs.\n\nIf your NPV is positive, \n==> Your returns > Your financial costs.\n\nIf your NPV is negative, \n==> Your returns < Your financial costs.\n\nIRR gives you the exact rate of return that you earned based on the returns you get (cash inflows) at various points of time in the future.\n\n\nFor Finding NPV\n================\nCash inflows for all the periods are discounted with the appropriate discounting factors to obtain the discounted cash flows.. whose sum is the total discounted cash inflow..\n\nThis set off against the initial cash outlay would give you the NPV\n\nYou can find the factors from tables or calculate them on your own..\n\nThe logic behind a factor\nSay if the rate is 10% \n\nFirst Year\n------------\nA sum of $100 at the beginning of the first year i.e. zero period would become 110 at the end of the first year\n\nAn amount of 110 at the end is equal to 100 now \nAn amount of 1 at the end is equal to ??\n(1 * 100)/110 i.e. 100/110 = 0.9090\n\nSecond year\n-----------\nA sum of $100 at the beginning of the first year i.e. zero period would become 121 at the end of the second year\n\nAn amount of 121 at the end is equal to 100 now \nAn amount of 1 at the end is equal to ??\n(1 * 100)/121 i.e. 100/121 = 0.8264\n\n\n\nFive and half years\n-----------------\nA sum of $100 at the beginning of the first year i.e. zero period would become 169 at the end of the five and half  years\n\nAn amount of 169 at the end is equal to 100 now \nAn amount of 1 at the end is equal to ??\n(1 * 100)/121 i.e. 100/169 = 0.5917\n\nIf you have factor tables ready hand you can use that for the whole years and calculate the factor for 5 and half years.\n\n\nhttp://www.futureaccountant.com/
700028
it the rate of return that make the npv = 0.\n\nEg:\nInitial investment (cfo) = -500\nCF1 = 300\nCF2 = 400\nCF3 = 400\n\n0 = -500 + 300/ (1 + irr) + 400/ (1+irr)^2 + 400 / (1 + irr)^3\nThe longer the cash flow the more difficult to calculate, so you need a financial calculator....\n\ncheck this out: http://www.datadynamica.com/IRR.asp