Nestlé of Switzerland Revisited. Nestlé of Switzerland is revisiting its cost of equity analysis. As a result of extraordinary actions by the Swiss Central Bank, the Swiss bond index yield (10-year maturity) has dropped to a record low of 0.57%. The Swiss equity markets have been averaging 7.80% returns, while the Financial Times global equity market returns, indexed back to Swiss francs, stands at 8.31%. Nestlé's corporate treasury staff has estimated the company's domestic beta at 0.836, but its global beta (against the larger global equity market portfolio) at 0.486. a. What is Nestlé's cost of equity based on the domestic portfolio for a Swiss investor? b. What is Nestle's cost of equity based on a global portfolio for a Swiss investor?

Nestlé of Switzerland Revisited. Nestlé of Switzerland is revisiting its cost of equity analysis. As a result of extraordinary actions by the Swiss Central Bank, the Swiss bond index yield (10-year maturity) has dropped to a record low of 0.57%. The Swiss equity markets have been averaging 7.80% returns, while the Financial Times global equity market returns, indexed back to Swiss francs, stands at 8.31%. Nestlé's corporate treasury staff has estimated the company's domestic beta at 0.836, but its global beta (against the larger global equity market portfolio) at 0.486. a. What is Nestlé's cost of equity based on the domestic portfolio for a Swiss investor? b. What is Nestle's cost of equity based on a global portfolio for a Swiss investor?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 13QTD

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Nestlé of Switzerland Revisited. Nestlé of Switzerland is revisiting its cost of equity analysis. As a result of extraordinary actions by the Swiss Central Bank, the Swiss bond index yield (10-year maturity) has dropped to a record low of 0.520%. The Swiss equity markets have been averaging 8.400% returns, while the Financial Times global equity market returns, indexed back to Swiss francs, are at 8.820%. Nestlé’s corporate treasury staff has estimated the company’s domestic beta at 0.825 but its global beta (against the larger global equity market portfolio) at .515. What is Nestlé’s cost of equity based on the domestic portfolio of a Swiss investor? What is Nestlé’s cost of equity based on a global portfolio for a Swiss investor?
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