Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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I'm a bit confused about how to calculate the Cost of equity for the projects listed below knowing that, tax rate 40%he risk premium = 5.5%, treasury bill rate = 5.5%. No. outs tanding shares = 50 paying annual Dividends of $2 per share. Current capital estructure $500mill. Current beta = 1. Expected increase in working capital 50 mill. The plan is to finance the net capital expenditures & working capital needs with 30% debt. Current cash balance after dividends = 100 mill. Could you please help me? Thanks

Project Investments in mill of Dollars Beta
A 190 0.6
B 200 0.8
C 200 1
D 200 1.2
E 100 1.5

Income statement:

Income Statements    
  Current ($) Projected for Next Year ($)
EBITDA        1,200        1,350
Less: Depreciation 200 250
EBIT        1,000        1,100
Less: Int. Expense 200 200
EBT           800           900
Less: Taxes 320 360
Net Income 480 540
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