Medtronic is listed in NYSE and in 2017, it has maturity risk premium of 4%,default risk premium is 3%, cash flow risk premium is 1.5%, bankruptcy riskpremium is 2%, illiquidity risk premium is 1%, real interest rate is 2%, inflationrate is 1%, and beta is 1.4. Assume in 2017, S&P 500 return is 20%, return fromNASDAQ is 15%, and return from NYSE is 17%. All numbers are in annualizedterm. What is Medtronic's cost of equity and cost of debt, respectively.O 19.8% and 10%O 26.8% and 11%O 22.6% and 10.5%O 22.6% and 11%

Solution- Step 1- This question is based on the concept of calculation of cost of debt and cost…

17, it has maturity risk premium of default risk premium is 3%, cash flow risk premium is 1.5%, bankruptcy r premium is 2%, illiquidity risk premium is 1%, real interest rate is 2%, infl. rate is 1%, and beta is 1.4. Assume in 2017, S&P 500 return is 20%, retum NASDAQ is 15%, and return from NYSE is 17%. All numbers are in annua term. What is Medtronic's cost of equity and cost of debt, respectively. O 19.8% and 10% O 26.8% and 11% O 22 6% and 10

17, it has maturity risk premium of default risk premium is 3%, cash flow risk premium is 1.5%, bankruptcy r premium is 2%, illiquidity risk premium is 1%, real interest rate is 2%, infl. rate is 1%, and beta is 1.4. Assume in 2017, S&P 500 return is 20%, retum NASDAQ is 15%, and return from NYSE is 17%. All numbers are in annua term. What is Medtronic's cost of equity and cost of debt, respectively. O 19.8% and 10% O 26.8% and 11% O 22 6% and 10

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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