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In mid-2012, AOL Inc. had $200 million in debt, total equity capitalization of $3.1 billion, and an equity beta of 0.97 (as reported on Yahoo! Finance). Included in AOL's assets was $1.6 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 2.9% and the market risk premium is 3.9%. a. What is AOL's enterprise value? b. What is the beta of AOL's business assets? c. What is AOL's WACC?

In mid-2012, AOL Inc. had $200 million in debt, total equity capitalization of $3.1 billion, and an equity beta of 0.97 (as reported on Yahoo! Finance). Included in AOL's assets was $1.6 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 2.9% and the market risk premium is 3.9%. a. What is AOL's enterprise value? b. What is the beta of AOL's business assets? c. What is AOL's WACC?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In mid-2012, AOL Inc. had $200 million in debt, total equity capitalization of $3.1 billion, and an equity beta of 0.97 (as reported on Yahoo! Finance). Included in AOL's assets was $1.6 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 2.9% and the market risk premium is 3.9%. a. What is AOL's enterprise value? b. What is the beta of AOL's business assets? c. What is AOL's WACC?
Transcribed Image Text:In mid-2012, AOL Inc. had $200 million in debt, total equity capitalization of $3.1 billion, and an equity beta of 0.97 (as reported on Yahoo! Finance). Included in AOL's assets was $1.6 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 2.9% and the market risk premium is 3.9%. a. What is AOL's enterprise value? b. What is the beta of AOL's business assets? c. What is AOL's WACC?
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