Given the following information for three publically traded comparable companies, estimate the the cost of capital for an all equity financed private company in the same industry using the average industry data from the comparable public companies. The data is also included in the exam exhibit file for convenience. Levered Company Ticker Beta Debt Equity Debt/Equity Freds FRD 1.96 50.0 120.0 0.42 Sobokawa SOB 1.29 5.0 275.0 0.02 Reclining REC 1.63 115.0 533.0 0.22 BBB Corp Bond Yield 12.13% 30 Year Treas. Bond Yield 7.25% Est. Mkt. Risk Prem. 7.0%

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
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Given the following information for three publically traded comparable
companies, estimate the the cost of capital for an all equity financed private
company in the same industry using the average industry data from the
comparable public companies. The data is also included in the exam exhibit file
for convenience.
Levered
Company
Ticker
Beta
Debt Equity Debt/Equity
Freds
FRD
1.96
50.0 120.0 0.42
Sobokawa
SOB
1.29
5.0
275.0 0.02
Reclining
REC
1.63
115.0 533.0 0.22
BBB Corp Bond Yield 12.13%
30 Year Treas. Bond Yield 7.25%
Est. Mkt. Risk Prem. 7.0%
Transcribed Image Text:Given the following information for three publically traded comparable companies, estimate the the cost of capital for an all equity financed private company in the same industry using the average industry data from the comparable public companies. The data is also included in the exam exhibit file for convenience. Levered Company Ticker Beta Debt Equity Debt/Equity Freds FRD 1.96 50.0 120.0 0.42 Sobokawa SOB 1.29 5.0 275.0 0.02 Reclining REC 1.63 115.0 533.0 0.22 BBB Corp Bond Yield 12.13% 30 Year Treas. Bond Yield 7.25% Est. Mkt. Risk Prem. 7.0%
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