The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.6 and that the expected risk premium on the market is 10%. The Treasury bill rate is 5%, and investors believe that Okefenokee's debt is essentially free of default risk. What is the required rate of return on Okefenokee stock? Note: Do not round intermediate
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The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.6 and that the expected risk premium on the market is 10%. The Treasury bill rate is 5%, and investors believe that Okefenokee's debt is essentially free of default risk. What is the required
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- The total market value of the equity of Okefenokee Condos is $3 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 1.1 and that the expected risk premium on the market is 10%. The Treasury bill rate is 5%, and investors believe that Okefenokee's debt is essentially free of default risk. What is the required rate of return on Okefenokee stock? (Do not round intermediate calculations. Enter your answer as a whole percent.) Estimate the WACC assuming a tax rate of 21%.(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Estimate the discount rate for an expansion of the company’s present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 1.3. What is the required…The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.6 and that the expected risk premium on the market is 10%. The Treasury bill rate is 4%, and investors believe that Okefenokee's debt is essentially free of default risk. a. What is the required rate of return on Okefenokee stock? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Estimate the WACC assuming a tax rate of 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Estimate the discount rate for an expansion of the company’s present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is .8. What is the…The total market value of the equity of Okefenokee Condos is $12 million, and the total value of its debt is $8 million. The treasurer estimates that the beta of the stock currently is 1.5 and that the expected risk premium on the market is 6%. The Treasury bill rate is 3%, and investors believe that Okefenokee's debt is essentially free of default risk. a. What is the required rate of return on Okefenokee stock? Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Estimate the WACC assuming a tax rate of 21%. Note: (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Estimate the discount rate for an expansion of the company's present business. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 2.0.…
- The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.6 and that the expected risk premium on the market is 10%. The Treasury bill rate is 4%, and investors believe that Okefenokee's debt is essentially free of default risk. a. What is the required rate of return on Okefenokee stock? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Estimate the WACC assuming a tax rate of 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Estimate the discount rate for an expansion of the company’s present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is .8. What is the…he total market value of the equity of Okefenokee Condos is $6 million, and the total value of its debt is $4 million. The treasurer estimates that the beta of the stock currently is 2.0 and that the expected risk premium on the market is 5%. The Treasury bill rate is 3%, and investors believe that Okefenokee's debt is essentially free of default risk. a. What is the required rate of return on Okefenokee stock? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Estimate the WACC assuming a tax rate of 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Estimate the discount rate for an expansion of the company’s present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 2.2. What is the…The total market value of the equity of Okefenokee Condos is $12 million, and the total value of its debt is $8 million. The treasurer estimates that the beta of the stock currently is 1.3 and that the expected risk premium on the market is 10%. The Treasury bill rate is 3%, and investors believe that Okefenokee's debt is essentially free of default risk. a. What is the required rate of return on Okefenokee stock? Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Estimate the WACC assuming a tax rate of 21%. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Estimate the discount rate for an expansion of the company's present business. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 1.5.…
- The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.5 and that the expected risk premium on the market is 12%. The Treasury bill rate is 3%, and investors believe that Okefenokee's debt is essentially free of default risk. a. Estimate the WACC assuming a tax rate of 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. Estimate the discount rate for an expansion of the company’s present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 1.0. What is the required rate of return on Okefenokee’s new venture? (You should assume that the risky project will not enable the firm to issue any…Calculate the required rate of return for Campbell Corp. common stock. The stock has a beta of 1.3, and Campbell is considered a large capitalization stock. Current long-term government bonds are yielding 5.0% and the equity risk premium is 5.8%. How would your required rate of return change if you used U.S. Treasury bills for your risk-free rate? Assume the current yield on T-bills is 1.25 percent. This is an artificially low rate because the Federal Reserve is trying to stimulate the economy out of a recession. How would this difference in required returns affect the value of any cash flow you would evaluate?Your broker has recommended that you purchase stock in Alacan, Inc. She estimates that the 1-year target price is $76.00, and Alacan consistently pays an annual dividend of $17.00. Analysts estimate that the stock has a beta of 0.91. The current risk-free rate is 2.70% and the market risk premium (RM - RF) is 9.50%. Assuming that CAPM holds, what is the intrinsic value of this stock?
- Other relevant information about the company follows: The 20-year Treasury Bond rate is currently 4.5 percent and you have estimated market-risk premium to be 6.75 percent using the returns on stocks and Treasury bonds from 2010 to 2019. Pharmos Incorporated has a marginal tax rate of 25 percent. Required: Answer the following question given the information above and from the photo attached 1. What is the estimated Internal Rate of Return (IRR) of the project? NO EXCEL SPREADSHEETS SHOW FULL WORKINGS WITHOUT EXCELAssume that the dividend payout ratio will be 55 percent when the rate on long-term government bonds falls to 9 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 8 percent and investors will require a 7 percent return. The return on equity will be 13 percent. What is your expectation of the market P/E ratio?Suppose you are considering two possible investment opportunities: a 12-year Treasury bond and a 7-year, A-rated corporate bond. The current real risk-free rate is 3%, and inflation is expected to be 2% for the next 2 years, 3% for the following 4 years, and 4% thereafter. The maturity risk premium is estimated by this formula: MRP = 0.02(t - 1)%. The liquidity premium (LP) for the corporate bond is estimated to be 0.3%. You may determine the default risk premium (DRP), given the company's bond rating, from the following table. Remember to subtract the bond's LP from the corporate spread given in the table to arrive at the bond's DRP. Corporate Bond Yield Rate Spread = DRP + LP U.S. Treasury 0.83 % — AAA corporate 1.03 0.20 % AA corporate 1.39 0.56 A corporate 1.79 0.96 What yield would you predict for each of these two investments? Round your answers to three decimal places. 12-year Treasury yield: fill in the blank _ % 7-year Corporate yield: fill…