Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Walmart's beta is 0.7. The market risk premium is 4.2 %. The appropriate risk-free rate is 0.04 %. What is Walmart's
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- FlavR Company stock has a beta of 2.14, the current risk-free rate is 2.14 percent, and the expected return on the market is 9.14 percent. What is FlavR Company's cost of equity?arrow_forwardAnswer the following a) When will the different DCF methods use the same discount rate? b) The cost of debt (ka) will change as the capital structure of a firm changes. Why or why not? c) Why does the cost of equity (k.) increase as the amount of debt in the capital structure of a firm increases? Why? d) Freebie Inc.'s common stock has a beta of 1.3. If the risk-free rate is 4.5% and the expected return on the market is 12%, what is its cost of equity capital? e) Why do branded food companies command the highest EBIT multiple (about 8) and transportation companies the lowest (about 3)? f) Should a firm use its cost of capital as a hurdle/discount rate to value all internal divisions? Why or why not? g) An option can have more than one source of value. Consider a mining company. The company can mine for ores today or wait another year (or more) to mine. What real options can you identify here? h) Do you consider dividend payments by the firm in calculating cash flows? Why or why not? i)…arrow_forwardXYZ has a beta coefficient of 1.76. Estimate its cost of equity if the risk-free rate is 8% and return on the broad market index is 16%. Calculate the cost of equity.arrow_forward
- Kaiser Aluminum has a beta of 0.70. If the risk-free rate (Res) is 5.0%, and the market risk premium (RPM) is 7.4%, what is the firm's cost of equity from retained earnings based on the CAPM? Your answer should be between 8.70 and 11.25, rounded to 2 decimal places, with no special characters.arrow_forwardJaiLai Cos. stock has a beta of 0.8, the current risk-free rate is 6.6 percent, and the expected return in the market is 10 percent. What is JaiLai's cost of equity/arrow_forwardRisk free rate = 5.00%; market return = 11.00%; and beta = 1.05. How much is the firm's cost of equity based on the CAPM? 11.30% 11.64% 11.99% 12.35%arrow_forward
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