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Microsoft Excel LibreOffice Calc

Kraft Heinz Co. (KHC)


Capital Asset Pricing Model (CAPM)

Medium level of difficulty

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Kraft Heinz Co.’s common stock.


Rates of Return

Kraft Heinz Co., monthly rates of return

Microsoft Excel LibreOffice Calc
Kraft Heinz Co. (KHC) Standard & Poor’s 500 (S&P 500)
t Date PriceKHC,t1 DividendKHC,t1 RKHC,t2 PriceS&P 500,t RS&P 500,t3
Jul 31, 2015 hidden hidden
1. Aug 31, 2015 hidden hidden hidden hidden
2. Sep 30, 2015 hidden hidden hidden hidden
3. Oct 31, 2015 hidden hidden hidden hidden
. . . . . . .
. . . . . . .
. . . . . . .
40. Nov 30, 2018 hidden hidden hidden hidden hidden
41. Dec 31, 2018 hidden hidden hidden hidden
Average: hidden hidden
Standard deviation: hidden hidden
Kraft Heinz Co. (KHC) Standard & Poor’s 500 (S&P 500)
t Date PriceKHC,t1 DividendKHC,t1 RKHC,t2 PriceS&P 500,t RS&P 500,t3
Jul 31, 2015 hidden hidden
1. Aug 31, 2015 hidden hidden hidden hidden
2. Sep 30, 2015 hidden hidden hidden hidden
3. Oct 31, 2015 hidden hidden hidden hidden
4. Nov 30, 2015 hidden hidden hidden hidden hidden
5. Dec 31, 2015 hidden hidden hidden hidden hidden
6. Jan 31, 2016 hidden hidden hidden hidden
7. Feb 29, 2016 hidden hidden hidden hidden
8. Mar 31, 2016 hidden hidden hidden hidden hidden
9. Apr 30, 2016 hidden hidden hidden hidden
10. May 31, 2016 hidden hidden hidden hidden hidden
11. Jun 30, 2016 hidden hidden hidden hidden
12. Jul 31, 2016 hidden hidden hidden hidden
13. Aug 31, 2016 hidden hidden hidden hidden hidden
14. Sep 30, 2016 hidden hidden hidden hidden
15. Oct 31, 2016 hidden hidden hidden hidden
16. Nov 30, 2016 hidden hidden hidden hidden hidden
17. Dec 31, 2016 hidden hidden hidden hidden
18. Jan 31, 2017 hidden hidden hidden hidden
19. Feb 28, 2017 hidden hidden hidden hidden
20. Mar 31, 2017 hidden hidden hidden hidden hidden
21. Apr 30, 2017 hidden hidden hidden hidden
22. May 31, 2017 hidden hidden hidden hidden hidden
23. Jun 30, 2017 hidden hidden hidden hidden
24. Jul 31, 2017 hidden hidden hidden hidden
25. Aug 31, 2017 hidden hidden hidden hidden hidden
26. Sep 30, 2017 hidden hidden hidden hidden
27. Oct 31, 2017 hidden hidden hidden hidden
28. Nov 30, 2017 hidden hidden hidden hidden hidden
29. Dec 31, 2017 hidden hidden hidden hidden
30. Jan 31, 2018 hidden hidden hidden hidden
31. Feb 28, 2018 hidden hidden hidden hidden
32. Mar 31, 2018 hidden hidden hidden hidden hidden
33. Apr 30, 2018 hidden hidden hidden hidden
34. May 31, 2018 hidden hidden hidden hidden hidden
35. Jun 30, 2018 hidden hidden hidden hidden
36. Jul 31, 2018 hidden hidden hidden hidden
37. Aug 31, 2018 hidden hidden hidden hidden hidden
38. Sep 30, 2018 hidden hidden hidden hidden
39. Oct 31, 2018 hidden hidden hidden hidden
40. Nov 30, 2018 hidden hidden hidden hidden hidden
41. Dec 31, 2018 hidden hidden hidden hidden
Average: hidden hidden
Standard deviation: hidden hidden

Show all

1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of KHC during period t

3 Rate of return on S&P 500 (the market portfolio proxy) during period t


Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceKHC hidden
VarianceS&P 500 hidden
CovarianceKHC, S&P 500 hidden
Correlation coefficientKHC, S&P 5001 hidden
βKHC2 hidden
αKHC3 hidden

Calculations

1 Correlation coefficientKHC, S&P 500
= CovarianceKHC, S&P 500 ÷ (Standard deviationKHC × Standard deviationS&P 500)
= hidden ÷ (hidden × hidden)

2 βKHC
= CovarianceKHC, S&P 500 ÷ VarianceS&P 500
= hidden ÷ hidden

3 αKHC
= AverageKHC – βKHC × AverageS&P 500
= hiddenhidden × hidden


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF hidden
Expected rate of return on market portfolio2 E(RM) hidden
Systematic risk (β) of Kraft Heinz Co.’s common stock βKHC hidden
 
Expected rate of return on Kraft Heinz Co.’s common stock3 E(RKHC) hidden

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 E(RKHC) = RF + βKHC [E(RM) – RF]
= hidden + hidden [hiddenhidden]
= hidden