of $231 billion due in January of 2018 (19 months) and using the proceeds to pay a special dividend. FB has 2.31 billion shares outstanding, with a market price (June, 2016) of $116.62. The risk-free rate over this morizon is 0.25%. There is a call option Erading on FB with a strike price of $100 and a price of $29.24. What is the implied credit spread of Facebook's proposed debt

of $231 billion due in January of 2018 (19 months) and using the proceeds to pay a special dividend. FB has 2.31 billion shares outstanding, with a market price (June, 2016) of $116.62. The risk-free rate over this morizon is 0.25%. There is a call option Erading on FB with a strike price of $100 and a price of $29.24. What is the implied credit spread of Facebook's proposed debt

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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Suppose the risk-free rate (RF) is 3.64% and an analyst assumes a market risk premium (Rm - Rf) of 7.50% . Firm A just paid a dividend of $1.05 per share (i.e. 1.05). The analyst estimates the beta of Firm A to be 1.49 and estimates the dividend growth rate to be 4.13% forever. Firm A has 2.2 million shares outstanding . What is the market value of the equity of Firm A?
Indell stock has a current market value of $130 million and a beta of 1.50. Indell currently has risk-free debt as well. The firm decides to change its capital structure by issuing $27.79 million in additional risk-free debt, and then using this $27.79 million plus another $17 million in cash to repurchase stock. With perfect capital markets, what will the beta of Indell stock be after this transaction? The beta of Indell stock after the recapitalization is ... (Round to two decimal places.)
Indell stock has a current market value of $130 million and a beta of 1.50. Indell currently has risk-free debt as well. The firm decides to change its capital structure by issuing $27.79 million in additional risk-free debt, and then using this $27.79 million plus another $17 million in cash to repurchase stock. With perfect capital markets, what will the beta of Indell stock be after this transaction? The beta of Indell stock after the recapitalization is www (Round to two decimal places.)
Suppose the risk-free rate is 1.15% and an analyst assumes a market risk premium of 6.07%. Firm A just paid a dividend of $1.14 per share. The analyst estimates the β of Firm A to be 1.44 and estimates the dividend growth rate to be 4.17% forever. Firm A has 272.00 million shares outstanding. Firm B just paid a dividend of $1.68 per share. The analyst estimates the β of Firm B to be 0.77 and believes that dividends will grow at 2.55% forever. Firm B has 185.00 million shares outstanding. What is the value of Firm B?
Below is some data from Yahoo! Finance for Apple Inc on 11/5/2019. Assume that the market return is 7% and the risk free rate is 1.8%. a) What is the market risk premium? b) What is the cost of equity for Apple?
Suppose the risk-free rate is 3.62% and an analyst assumes a market risk premium of 6.27%. Firm A just paid a dividend of $1.04 per share. The analyst estimates the β of Firm A to be 1.33 and estimates the dividend growth rate to be 4.82% forever. Firm A has 268.00 million shares outstanding. Firm B just paid a dividend of $1.97 per share. The analyst estimates the β of Firm B to be 0.79 and believes that dividends will grow at 2.81% forever. Firm B has 185.00 million shares outstanding. What is the value of Firm A?
Suppose the risk-free rate is 3.91% and an analyst assumes a market risk premium of 6.52%. Firm A just paid a dividend of $1.11 per share. The analyst estimates the β of Firm A to be 1.20 and estimates the dividend growth rate to be 4.27% forever. Firm A has 264.00 million shares outstanding. Firm B just paid a dividend of $1.83 per share. The analyst estimates the β of Firm B to be 0.70 and believes that dividends will grow at 2.86% forever. Firm B has 197.00 million shares outstanding. What is the value of Firm B? Answer format: Currency: Round to: 2 decimal places.
Your broker has recommended that you purchase stock in Beacan, Inc. Beacan recently paid its annual dividend ($14.00). The firm also boasts an ROE of 15%, of which 50% is paid as dividends. Analysts estimate that the stock has a beta of 0.79. The current risk-free rate is 2.00% and the market return (RM) is 11.10%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Suppose the risk-free rate is 2.67% and an analyst assumes a market risk premium of 6.91%. Firm A just paid a dividend of $1.21 per share. The analyst estimates the β of Firm A to be 1.45 and estimates the dividend growth rate to be 4.46% forever. Firm A has 295.00 million shares outstanding. Firm B just paid a dividend of $1.75 per share. The analyst estimates the β of Firm B to be 0.89 and believes that dividends will grow at 2.83% forever. Firm B has 188.00 million shares outstanding. What is the value of Firm A? Answer format: Currency: Round to: 2 decimal places.
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The DR Company’s common stock has a beta of 1.07. What is the company’s cost of equity capital if the risk-free rate is 3.5% and the expected return on the market is 10%?
In early 2008, we estimated a beta of 1.162 for Deutsche Bank, which used in conjunction with the Euro risk-free rate of 4% (in January 2008) and an equity risk premium of 4.50%, yielded a cost of equity of 9.23%. In November 2013, the Euro risk-free rate had dropped to 1.75% and the Deutsche’s equity risk premium had risen to 6.12%. Required: What is the Cost of Equity for 2008 What is the Cost of equity for 2013

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