Question

In: Finance

Kimberly-Clark Corporation, together with its subsidiaries, manufactures and markets personal care and consumer tissue products worldwide....

Kimberly-Clark Corporation, together with its subsidiaries, manufactures and markets personal care and consumer tissue products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional. Assume you are the CFO and you have been asked to calculate the stock’s beta. Assume that Kimberly-Clark has an expected return of 19 percent. Also, assume that the risk-free rate is 5 percent and the market risk premium is 10 percent.

Required: Calculate the beta for Kimberly-Clark’s stock.

Solutions

Expert Solution

As per the Capital Asset Pricing Model,

Expected return= risk free rate + beta*(market rate of return- risk free rate)

So, beta = (expected return - risk free rate)/ (market rate of return- risk free rate)

Now, market risk premium= (market rate of return- risk free rate)

Therefore, beta = (19-5)/(10) = 1.4


Related Solutions

DOT Foods, Inc.,together with its subsidiaries, operates as a food company worldwide. It operates through four...
DOT Foods, Inc.,together with its subsidiaries, operates as a food company worldwide. It operates through four segments: Beef, Pork, Chicken, and Prepared Foods. DOT forecasts that its net income will be $12 million this year. The company has no depreciation expense so its net cash flow is $12 million, and its target capital structure consists of 70 percent equity and 30 percent debt. Tyson’s capital budget is $10 million.   Required: a)      If   the company   follows   a   residual   distribution   policy   (with   all...
Colgate-Palmolive is a leading global consumer products company tightly focused on Oral Care, Personal Care, Home...
Colgate-Palmolive is a leading global consumer products company tightly focused on Oral Care, Personal Care, Home Care, and Pet Nutrition. Colgate sells its products in over 200 countries and territories around the world. Colgate launched Colgate Kitchen Entrees in 1982 in an effort to expand its brand. Using the principles in this course and personal research, please explain: 1. With such a brand recognized name, why did this campaign fail? 2. What could have been done (if anything) to make...
Solomon Company manufactures a personal computer designed for use in schools and markets it under its...
Solomon Company manufactures a personal computer designed for use in schools and markets it under its own label. Solomon has the capacity to produce 31,000 units a year but is currently producing and selling only 14,000 units a year. The computer’s normal selling price is $1,610 per unit with no volume discounts. The unit-level costs of the computer’s production are $480 for direct materials, $230 for direct labor, and $190 for indirect unit-level manufacturing costs. The total product- and facility-level...
Amerbrand Company was a diversified company that sold various consumer products, including food, tobacco, distilled, and personal care products and financial services.
Amerbrand Company (A)Amerbrand Company was a diversified company that sold various consumer products, including food, tobacco, distilled, and personal care products and financial services. Financial statements for the company for 2004 are shown in Exhibit 1. These statements reflect the following transactions (dollar amounts in thousands):1. Depreciation and amortization expense was $115,974.2. Net income included a loss of $66,046 resulting from the write-off of some obsolete equipment. The equip- ment had not yet been disposed of.3. Net income included $59,610...
Describe how a personal care product's rheology --flow characteristics-- effects both its performance for the consumer...
Describe how a personal care product's rheology --flow characteristics-- effects both its performance for the consumer and its physical stability.
Barrett Corporation manufactures leather products. The corporation uses a non-contributory, defined benefit pension plan for its...
Barrett Corporation manufactures leather products. The corporation uses a non-contributory, defined benefit pension plan for its 230 employees. The footnote to the financial statements relating to the pension plan, in part, stated: Note J. The company has a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and the employee’s compensation during the last four years of employment. The company’s funding policy is to contribute annually the maximum amount allowed under...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT