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

jeff jeffy answered 2 years ago

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