Given an expected market return of 12.0%, a beta of 0.75 for Benson Industries, and a risk-free rate of 4.0%, what is the expected return for Benson Industries?

Re = 10%

Explanation:

using the CAPM formula, the cost of equity is:

Re = risk free + (beta x market premium)

Re = 4% + ((0.75 x 8%) = 10%

Since the beta is lower than 1, this stock is less volatile than the market, that is why the required rate of return is lower than the market return.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.