3. define risk and investment risk. describe standard deviation and the coefficient of variation and how they are used to develop a measure of risk for a stock. the average stock in the s& p 500 has a standard deviation in ror of 22% and a mean ror of 12%. another stock, a publicly-traded venture capital stock, vc inc., has a standard deviation in ror of 50% and a mean of 50%. which stock is riskier and explain your response using the statistics above. assuming a 12% rate of return on the stock market, a 4% risk-free rate of return, obtain the beta for the company that you analyzed in question set 1 from yahoo. interpret the beta. what would be that company’s cost of common equity based on your calculation?

The gilbert instrument corporation is considering replacing the wood steamer it currently uses to shape guitar sides. the steamer has 6 years of remaining life. if kept,the steamer will have depreciaiton expenses of $650 for five years and $325 for the sixthyear. its current book value is $3,575, and it can be sold on an internet auction site for$4,150 at this time. if the old steamer is not replaced, it can be sold for $800 at the endof its useful life. gilbert is considering purchasing the side steamer 3000, a higher-end steamer, whichcosts $12,000 and has an estimated useful life of 6 years with an estimated salvage value of$1,500. this steamer falls into the macrs 5-year class, so the applicable depreciationrates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. the new steamer is fasterand allows for an output expansion, so sales would rise by $2,000 per year; the newmachine's much greater efficiency would reduce operating expenses by $1,900 per year.to support the greater sales, the new machine would require that inventories increase by$2,900, but accounts payable would simultaneously increase by $700. gilbert's marginalfederal-plus-state tax rate is 40%, and its wacc is 15%.a. should it replace the old steamer? b. npv of replace = $2,083.51