Assignment On Hypothetical company

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Finance

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Table of Contents
Question 2..................................................................................................................................3
a).............................................................................................................................................3
b)............................................................................................................................................3
Question 3..................................................................................................................................3
a).............................................................................................................................................3
References..................................................................................................................................6
Appendix....................................................................................................................................7

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Question 2
a)
The expected return for the company HVN and hypothetical are calculated and they are as
provided hereunder:
Particulars HVN Hypothetical
company
Risk free rate (Rf) 0.68 0.68
Market risk premium
(Rp)
5.5 5.5
Beta (b) 0.62 1.6
CAPM Rf + b*Rp
Expected return 4.09 9.48
b)
Particulars Weights Expected
return
Beta Weighted
return
weighted
beta
HVN 0.7 4.09 0.62 2.863 0.434
Hypothetical
company
0.3 9.48 1.6 2.844 0.48
Portfolio return 5.71
Portfolio beta 0.91
Question 3
a)
Harvey Norman is the company which has been founded in 1982 and is involved in providing
the individual franchisees with the franchise. They are involved in selling the products from
various departments and that includes a computer, communication, furniture and electrical
goods. There are several brands under which the company operates franchised complexes.
The company is also involved with media placements and property investments (Capitaliq,
2020). It lies under the general merchandise stores industry and has seen the changes in the
recent period because of the coronavirus. This is considered as the risk for the company and
the industry as all the business is affected. The economy is facing the downfall because of
this and that affects the company as well in an adverse manner.