Levered beta estimation Suppose that a benchmark company is identified is 30 percent funded by debt. By contrast, the weight of debt in the subject company's capital structure is only 45 percent. The benchmark's beta is estimated at 1.4. a. What is the unlevered beta of the benchmark company? Number Round your answer to two decimals b. What is the levered beta of the subject company? Number Round your answer to two decimals
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- If the D/E ratio of a firm is 1.4, what is the firm's weight on equity? Hint: the formula is on your excel project sheet. Use decimal notation (14.26% would be 14.26).A company hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $2.45; P0 = $28.96; and g = 4.06% (constant). What is the cost of equity from retained earnings? Do not round your intermediate calculations. Express your answer as a percent rounded to two decimal places. (For example, 4.567% should be entered as 4.57)A company hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $2.45; P0 = $28.96; and g = 4.06% (constant). What is the cost of equity from retained earnings? Do not round your intermediate calculations. Express your answer as a percent rounded to two decimal places.
- DuPont system of analysis Use the following financial information for AT&T and Verizon to conduct a DuPont system of analysis for each company. Sales Earnings available for common stockholders Total assets Stockholders' equity a. Which company has the higher net profit margin? Higher asset turnover? b. Which company has the higher ROA? The higher ROE? c. Which company has the higher financial leverage multiplier? a. Net profit margin (Round to three decimal places.) AT&T Net profit margin AT&T $164,000 13,333 403,921 201,934 Verizon Verizon $126,280 13,608 244,280 24,232Estimating Cost of Equity Capital Assume that a company’s market beta equals 0.8, the risk-free rate is 5%, and the market return equals 8%. Compute the company’s cost of equity capital. Round answer to one decimal place (ex: 0.0245 = 2.5%) Answer%Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.80; P0 = $32.50; and g = 8.00% (constant). What is the cost of equity from retained earnings based on the DCF approach?
- Gates Appliances has a return-on-assets (investment) ratio of 20 percent. a. If the debt-to-total-assets ratio is 25 percent, what is the return on equity? (Input your answer as a percent rounded to 2 decima) places.) b. If the firm had no debt, what would the return-on-equity ratio be? (Input your answer as a percent rounded to 2 decimal places.)Determine the cost of common stock (equity). The T-Bill rate is 5.2%. The Market Return is 12.7%. What is the company's cost of equity capital if the company has a beta of 1.27? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 5 percent and its return on assets (investment) is 22.5 percent. What is its assets turnover? (Round your answer to 2 decimal places.) b. If the Butters Corporation has a debt-to-total-assets ratio of 55.00 percent, what would the firm's return on equity be? (Input your answer as a percent rounded to 2 decimal places.) c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 50.00 percent? (Input your answer as a percent rounded to 2 decimal places.)
- If we know that a firm has a net profit margin of 4.3%, total asset turnover of 0.77, and a financial leverage multiplier of 1.37, what is its ROE? What is the advantage to using the DuPont system to calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity? The firm's ROE is %. (Round to two decimal places.) What is the advantage to using the DuPont system to calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity? (Select from the drop-down menus.) Observe the modified DuPont formula (see) and notice that each component can be compared with industry standards to assess the firm's performance. Therefore, the advantage of using the Dupont system is that ROE is broken into three distinct components. Starting at the right we see how has increased assets over the owners' original equity. Next, moving to the left, we see how efficiently the firm used its sales. to…Compute Topp Company's price-earnings (PE) ratio if its common stock has a market value of $22.20 per share and its earnings per share (EPS) is $4.00. Topp's key competitor, Lower Deck, has a price-earnings (PE) ratio of 9.5. For which company does the market have higher expectations of future performance? Complete this question by entering your answers in the tabs below. Price Earnings Ratio Future Performance Compute Topp Company's price-earnings (PE) ratio if its common stock has a market value of $22.20 per share and its earnings per share (EPS) is $4.00. Choose Numerator: Price Earnings Ratio 1 Choose Denominator: 1 1 Price Earnings Ratio = Price Earnings RatioYou've collected the following information about Groot, Inc.: Profit margin Total asset turnover Total debt ratio Payout ratio = 4.44% = 3.50 = .25 = 29% a. What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the ROA? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Sustainable growth rate b. ROA % 15.54 %