Estimate the weighted-average cost of capital for Home Depot (HD), Altria (MO), Caterpillar (CAT), and Intel (INTC). You can estimate the expected stock returns for these companies by using the betas shown on finance.yahoo.com. You can also use Yahoo! Finance to find the relative proportions of equity and debt for each company. Remember, though, to use the mar- ket value of the equity, not its book value. Finding the yield on the debt is a little trickier. One possibility it to log on to the Federal Reserve Bank of St. Louis site at https://fred.stlouisfed .org/ to find the current level of Treasury yields and the yield spreads (i.e., the extra yield for bonds with different ratings). An alternative is to view recent transactions at www.finra.org /industry/trace/corporate-bond-data. Note: As we write this, Moody's provides an A rating for all four companies.
Estimate the weighted-average cost of capital for Home Depot (HD), Altria (MO), Caterpillar (CAT), and Intel (INTC). You can estimate the expected stock returns for these companies by using the betas shown on finance.yahoo.com. You can also use Yahoo! Finance to find the relative proportions of equity and debt for each company. Remember, though, to use the mar- ket value of the equity, not its book value. Finding the yield on the debt is a little trickier. One possibility it to log on to the Federal Reserve Bank of St. Louis site at https://fred.stlouisfed .org/ to find the current level of Treasury yields and the yield spreads (i.e., the extra yield for bonds with different ratings). An alternative is to view recent transactions at www.finra.org /industry/trace/corporate-bond-data. Note: As we write this, Moody's provides an A rating for all four companies.
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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Transcribed Image Text:US Gou Bond interest rate =
p.94%
An nuare zed StoCR mautiet retuon=S.4:%
Home Depot
Beta : P.06
Yield ondebt- 2.84:%.
D ebt /Equitys -23.64
Altera CMO)
Beta = 0.61
Vreld on debl = 2.84.%.
Delot / Equty = - 25.61
Cater pi llar C CAT)
Beta= O.a2
Yield on debt.2.84%%
Debt /Equity =
232.78
Intel (INTC)
Beta= 0.55
Yield
Debt /Equity = 40.51
on debt = 2.4%
Transcribed Image Text:Estimate the weighted-average cost of capital for Home Depot (HD), Altria (MO), Caterpillar (CAT), and
Intel (INTC). You can estimate the expected stock returns for these companies by using the betas shown
on finance.yahoo.com. You can also use Yahoo! Finance to find the relative proportions of equity and debt
for each company. Remember, though, to use the mar- ket value of the equity, not its book value. Finding
the yield on the debt is a little trickier. One possibility it to log on to the Federal Reserve Bank of St. Louis
site at https://fred.stlouisfed .org/ to find the current level of Treasury yields and the yield spreads (i.e., the
extra yield for bonds with different ratings). An alternative is to view recent transactions at www.finra.org
/industry/trace/corporate-bond-data. Note: As we write this, Moody's provides an A rating for all four
companies.
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