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Capital asset pricing models illustrates the association of risks in certain investments. CAMP gives an overview calculation of the investment risk and the returns that an investor expects from an investment. The model is useful in making decisions on which securities to invest in thus identifying profitable stock. An investor can use CAMP to assess the risks likely to face available securities in the market. With the assessment, the investor can make decisions on investing in stock that has minimum risks, preventing any potential financial loss.
Investors are advised by CAMP to diversify their investments to prevent development of unique risks. CAMP can be applied by investors in determining markets that riskier for them to get more profits. The risky markets are hard to diversify and all securities are affected by risks. Investors receive a discount rate that is beneficial when using CAMP in investment appraisal rather than using WACC. The rate is useful to aid the investors in comparing different market prices.
Through CAMP information uniformity is achieved because the model provides information that is similar promoting market efficiency. The beta and the expected return relationship is illustrated by the CAMP. Investors can use CAMP as a tool to analyze the market behaviors to be make decision on the price to pay for a particular security. Also, the model is useful in estimating the investors capital cost of equity due to the model’s nature of taking into considerations the systematic risks levels in relation to the whole market.
Duffie, D. (2010). Dynamic asset pricing theory. Princeton University Press.
Fama, E. F., & French, K. R. (2004). The capital asset pricing model: Theory and evidence. The Journal of Economic Perspectives, 18(3), 25-46.
Carlson v. Ailes
Fox News personality Miss Gretchen Carlson filled a lawsuit at the New Jersey court against the then Fox News CEO Roger Ailes in the year 2016. Carlos sued Ailes for unlawfully retaliating against her and sabotaging her journalism career. Ailes was retaliating from Carlson complains about harassment and discrimination in the firm. Carlson was campaigning for fair compensation, career development and desirable work allocation.
It is alleged the CEO removed the journalism from her 2pm newscast show and was later terminated for declining sexual advances from Ailes. Reports indicated that Carlson was a diligent employee thus having no solid evidence for her termination. The suit also included sexual harassment from Carlson fellow host Steve Doocy which indicated Carlson was suing the Fox News. On filling the lawsuit Megyn Kelly from the firm also reported sexual harassment from the CEO. The firm hired an investigated who confirm that the allegations on Ailes were true.
The firm agreed to settle the case outside court by letting go of Ailes and paying him a severance pay of $20 million. This was a way of saving the company’s reputation but Ailes career ended as he had been the head of Fox News since it was founded in 1996. Carlson was contented for the cause of action taken by the firm and was ready to go on with her life.
News Documents (The New York Times). (n.d.). Gretchen Carlson’s Lawsuit Against Roger Ailes. Retrieved May 09, 2017, from https://www.documentcloud.org/documents/2941030- Carlson-Complaint-Filed.html
Now Ailes is vigorously denying her accusations, & Fox’s parent company is conducting an “internal review.” (n.d.). Fox conducting review of Roger Ailes after Gretchen Carlson sexual harassment lawsuit. Retrieved May 09, 2017, from http://money.cnn.com/2016/07/06/media/gretchen-carlson-roger-ailes-lawsuit/index.html