I'm a bit confused about how to calculate the Cost of equity for the projects listed below knowing that, tax rate 40%he risk premium = 5.5%, treasury bill rate = 5.5%. No. outs tanding shares = 50 paying annual Dividends of $2 per share. Current capital estructure $500mill. Current beta = 1. Expected increase in working capital 50 mill. The plan is to finance the net capital expenditures & working capital needs with 30% debt. Current cash balance after dividends = 100 mill. Could you please help me? Thanks Project Investments in mill of Dollars Beta A 190 0.6 B 200 0.8 C 200 1 D 200 1.2 E 100 1.5 Income statement: Income Statements Current ($) Projected for Next Year ($) EBITDA 1,200 1,350 Less: Depreciation 200 250 EBIT 1,000 1,100 Less: Int. Expense 200 200 EBT 800 900 Less: Taxes 320 360 Net Income 480 540
I'm a bit confused about how to calculate the Cost of equity for the projects listed below knowing that, tax rate 40%he risk premium = 5.5%, treasury bill rate = 5.5%. No. outs tanding shares = 50 paying annual Dividends of $2 per share. Current capital estructure $500mill. Current beta = 1. Expected increase in working capital 50 mill. The plan is to finance the net capital expenditures & working capital needs with 30% debt. Current cash balance after dividends = 100 mill. Could you please help me? Thanks Project Investments in mill of Dollars Beta A 190 0.6 B 200 0.8 C 200 1 D 200 1.2 E 100 1.5 Income statement: Income Statements Current ($) Projected for Next Year ($) EBITDA 1,200 1,350 Less: Depreciation 200 250 EBIT 1,000 1,100 Less: Int. Expense 200 200 EBT 800 900 Less: Taxes 320 360 Net Income 480 540
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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I'm a bit confused about how to calculate the
| Project | Investments in mill of Dollars | Beta |
| A | 190 | 0.6 |
| B | 200 | 0.8 |
| C | 200 | 1 |
| D | 200 | 1.2 |
| E | 100 | 1.5 |
Income statement:
| Income Statements | ||
| Current ($) | Projected for Next Year ($) | |
| EBITDA | 1,200 | 1,350 |
| Less: |
200 | 250 |
| EBIT | 1,000 | 1,100 |
| Less: Int. Expense | 200 | 200 |
| EBT | 800 | 900 |
| Less: Taxes | 320 | 360 |
| Net Income | 480 | 540 |
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