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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Stocks A and B have the following historical returns:YearStock A's Returns, raStock B's Returns, ra2016(18.60%)(14.50%)201734.2520.40201814.7539.902019(1.00)(9.70)202026.7520.05a. Calculate the average rate of return for each stock during the period 2016 through 2020. Round your answers to two decimal places.Stock A:11.23%Stock B:11.23%b. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would the realized rate of return on the portfolio have been each year? Round your answers to two decimal places. Negative values should be indicated by a minus sign.YearPortfolio2016-16.55%201727.33201827.33%2019-5.35202023.40What would the average return on the portfolio have been during this period? Round your answer to two decimal places.11.23c. Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places.Stock AStock BPortfolioStandard Deviationd. Calculate the coefficient of variation for each…
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Imagine TOP HAT Prefabs issued common shares at a market price of GBP 88 and paid dividends of GBP 6 in 2020. If dividends in 2021 are expected to grow by 5%, the market by 8%, and flotation costs are 20% of market price, what would the company’s cost of equity be? Current market price is GBP 99 and the gilt bond (UK government) gives a 1% rate. If TOPHAT Prefabs was planning to provide a constant growth rate of dividends, what would this growth rate be considering that the UK Gilt rate is 1,5%, the expected rate of return of the market is 3% and the CAPM is 12%? The company needs to purchase raw materials and decides to contract 2 loans for a period of 5 years, as follows: a GBP 80,000 with a 3% semi-annual interest rate and a GBP 150,000 with a 2% quarterly interest rate. What is the effective interest rate for TOPHAT Prefabs? The company decides to renew its manufacturing equipment and sell 2 assembling machines at a price of GBP 15,000 and GBP 25,000 respectively. The…
Consider the equity linked note again. If we assume the current stock price is So = $100, the strike price is 93% x So, the risk-free interest rate is 10% per annum, the volatility is 30% per annum, and the tenor of ELN is 1 month. There is no dividends. What is the discount rate of ELN calculated by BSM formula?
You are given the following information: D = Debt E = Equity D/E = Target debt-to-equity = 40% T = Corporate marginal tax rate = 30% Cost of Debt = 6% Rf = Risk free rate = 10-year U.S. treasury bond rate = 2.0% Rm = Return on a broad based stock index Rm – Rf = Equity risk premium = 5.0% βl = Levered beta (from finance.yahoo.com) = 1.5 Calculate the WACC.
The rate of return on which one of the following has a risk premium of 0%? Multiple Choice Long-term government bonds Long-term corporate bonds Intermediate-term government bonds U.S. Treasury bills Large-company stocks
F1. Subject :- Finance
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