If the Apiando's share price at 6 August 2022 is $43.88 whereas beta is 1.97. US government bond at the same period is 3.55%, and the average return of NASDAQ at 6 August 2022 is 12.95%. REQUIRED: Estimate the cost of equity using the Capital Asset Pricing Model (show all workings). If Appiando's beta is reduced to 0.67, what does that mean for the investors?

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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QUESTION SIX
Part A
If the Apiando's share price at 6 August 2022 is $43.88 whereas beta is 1.97. US government bond
at the same period is 3.55%, and the average return of NASDAQ at 6 August 2022 is 12.95%.
REQUIRED: Estimate the cost of equity using the Capital Asset Pricing Model (show all workings).
If Appiando's beta is reduced to 0.67, what does that mean for the investors?
Part B
On 15 November 2018, Resources Ltd issued $500,000,000 aggregate principal amount of $1,000
per value fixed interest bonds payable carrying quarterly coupon rate of 4.75%. They are maturing
on 15 November 2025. The bonds have a market value per bond of 125.5 as at 15 November 2018.
REQUIRED: If the tax rate is 25%, find the before tax and after-tax cost of debt using the yield to
maturity approach (show all workings). What does the yield to maturity approach tell you and how
is it used?
Transcribed Image Text:QUESTION SIX Part A If the Apiando's share price at 6 August 2022 is $43.88 whereas beta is 1.97. US government bond at the same period is 3.55%, and the average return of NASDAQ at 6 August 2022 is 12.95%. REQUIRED: Estimate the cost of equity using the Capital Asset Pricing Model (show all workings). If Appiando's beta is reduced to 0.67, what does that mean for the investors? Part B On 15 November 2018, Resources Ltd issued $500,000,000 aggregate principal amount of $1,000 per value fixed interest bonds payable carrying quarterly coupon rate of 4.75%. They are maturing on 15 November 2025. The bonds have a market value per bond of 125.5 as at 15 November 2018. REQUIRED: If the tax rate is 25%, find the before tax and after-tax cost of debt using the yield to maturity approach (show all workings). What does the yield to maturity approach tell you and how is it used?
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