Suppose Conroy Corp. in Exampl

Suppose Conroy Corp. in Example 9.2 is a defense contractor that makes sophisticated antimissile systems. Would the estimate of return done in that example be valid? What if Conroy were in the orange juice business?

Example 9.2

Conroy Corp. has a beta of 1.8 and is currently earning its owners a return of 14%. The stock market in general is reacting negatively to a new crisis in the Middle East that threatens world oil supplies. Experts estimate that the return on an average stock will drop from 12% to 8% because of investor concerns over the economic impact of a potential oil shortage as well as the threat of war. Estimate the change in the return on Conroy shares and its new return.

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