6- New market realities are now faced by businesses and they must plan accordingly. Maria Navatolova is now evaluating company X. The risk-free rate to be 2.65%, yield on company X bonds is 7.5%. The correlation between domestic market and company X is 0.85. The standard deviation on company X returns is 23.5%. The estimated standard deviation on domestic market returns are 19%. The correlation between international market and company X is 0.75. The standard deviation on company X returns is 23.5% in international market. The estimated standard deviation on international market returns are 21%. The domestic general return on market portfolio is estimated at 7.5% and in international market it is estimated at 6%. All other values remain the same. The debt ratio of the company X is 45%. The effective tax rate is 37%. a. Company X cost of equity in domestic and international market b. Company X cost of debt c. Company X WACC in domestic and international market.
6- New market realities are now faced by businesses and they must plan accordingly. Maria Navatolova is now evaluating company X. The risk-free rate to be 2.65%, yield on company X bonds is 7.5%. The correlation between domestic market and company X is 0.85. The standard deviation on company X returns is 23.5%. The estimated standard deviation on domestic market returns are 19%. The correlation between international market and company X is 0.75. The standard deviation on company X returns is 23.5% in international market. The estimated standard deviation on international market returns are 21%. The domestic general return on market portfolio is estimated at 7.5% and in international market it is estimated at 6%. All other values remain the same. The debt ratio of the company X is 45%. The effective tax rate is 37%. a. Company X cost of equity in domestic and international market b. Company X cost of debt c. Company X WACC in domestic and international market.
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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Question
6- New market realities are now faced by businesses and they must plan accordingly. Maria
Navatolova is now evaluating company X. The risk-free rate to be 2.65%, yield on company X
bonds is 7.5%. The correlation between domestic market and company X is 0.85. The standard
deviation on company X returns is 23.5%. The estimated standard deviation on domestic market
returns are 19%. The correlation between international market and company X is 0.75. The
standard deviation on company X returns is 23.5% in international market. The estimated standard
deviation on international market returns are 21%. The domestic general return on market
portfolio is estimated at 7.5% and in international market it is estimated at 6%. All other values
remain the same. The debt ratio of the company X is 45%. The effective tax rate is 37%.
a. Company X cost of equity in domestic and international market
b. Company X cost of debt
c. Company X WACC in domestic and international market.
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