1)Warwickshire plc is appraising a new project in a different line of business to its core operations. It has identified a suitable company, Nottingham plc, to use as a proxy. Details are as follows: Equity beta of Nottingham 1.250 Market value of Nottingham's debt: £39m Market value of Nottingham's equity: £45m Corporation Tax rate (both companies): 30% If Warwickshire is finance by £95m of equity and £95m of debt what would a suitable proxy equity beta for Warwickshire plc to use in the appraisal process?
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
1)Warwickshire plc is appraising a new project in a different line of business to its core operations. It has identified a suitable company, Nottingham plc, to use as a proxy. Details are as follows:
Equity beta of Nottingham 1.250
Market value of Nottingham's debt: £39m
Market value of Nottingham's equity: £45m
Corporation Tax rate (both companies): 30%
If Warwickshire is finance by £95m of equity and £95m of debt what would a suitable proxy equity beta for Warwickshire plc to use in the appraisal process?
2)
Ms Obang is reviewing the performance of one of the shares in her portfolio. She bought the share a year ago for £4.00 (ex-div). Over the year it paid a dividend of 20p and the share price currently stands at £4.20 (ex-div). The shares equity beta is 1.4. The yield on short-date Treasury Bills over the year has been 1.2% and the Market Return is 6%.
Using the
3)
The following information relates to the acquisition of M plc by D plc:
Recent dividend of M plc: 20p per share
Expected dividend growth of M plc: 3% per year
Number of shares of D plc: 20 million
Cost of equity of M plc: 8%
Number of shares of M plc: 15 million
What is the market value suggested by the dividend valuation model?
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