OGrady Apparel Company Essay Example for Free

OGrady App bel Company EssayAnalyzing Risk and Return on Chargers Products Investments next-to-last Sayou, a financial analyst for Chargers Products, a shaper of stadium benches, must evaluate the risk and return of two assets, X and Y. The firm is considering addng these assets to its diversified asset portfolio. To assess the return and risk of from each one asset, Junior gathered data on the annual cash flow and beginning-and end-of-year values of each asset over the immediately preceding 10 years, 1997-2006.These data are summarized in the table below. Juniors investigation suggests that both assets, on average, will tend to perform in the future just as they acquire during the retiring(a) 10 years. He therefore believes that the expected annual return can be estimated by finding the average annual return for each asset over the past 10 years.Junior believes that each assets risk can be assessed in two ways in isolation and as part of the firms diversified portfolio of assets. The risk of the assets in isolation can be found by using the standard deviation and coefficient of variation of returns over the past 10 years. The capital asset pricing model (CAPM) can be used to assess the assets risk as part of the firms portfolio of assets. Applying some sophisticated denary techniques, Junior estimated betas for assets X and Y of 1.60 and 1.10, respectively. In addition, he found that the risk-free rate is currently 7% and that the market return is 10%.