Premium for Financial Risk Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 25% debt and has a levered beta of 1.2. If the risk free rate is 4.5% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk? Round your answer to one decimal place. %

Premium for Financial Risk Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 25% debt and has a levered beta of 1.2. If the risk free rate is 4.5% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk? Round your answer to one decimal place. %

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 market risk premium is 5% and the risk-free interest rate is 5%. Using the data in the table here, a. Starbucks's stock. b. Hormel's stock. c. Avis Budget Group's stock. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Hormel 0.16 Avis Budget Group 2.55 Beta Starbucks 1.05 X " calculate the expected return of investing in
M12-15. Estimating Cost of Equity Capital Assume that a company’s market beta equals 0.6, the risk-free rate is 5%, and the market return equals 13%. Compute the company’s cost of equity capital. Round answer to one decimal place (ex: 0.0245 = 2.5%) Answer%
↑ Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.50%, the company's credit risk premium is 4.50%, the domestic beta is estimated at 1.06, the international beta is estimated at 0.75, and the company's capital structure is now 25% debt. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.30% and the company's effective tax rate is 35% Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates 8.10% b. 7.00% 6.5.00% d. 3.90% ++ a. Using the domestic CAPM, what is Ganado's weighted average cost of capital of the fom's equity risk premium is 10% (Round to two decimal places) tude 1.1.... oline me
Uranus beta is 1.2 and market risk premium 7 percent risk free rate is 10 percent. Uranus has debt is 14 percent tax rate is 35% what is WACc
Sub : FinancePls answer very fast.I ll upvote. Thank You An all-equity company decides to recapitalize. The company has an unlevered beta of 1.1, the market risk premium is 6% and the risk-free rate is 5%. The company's tax rate is 25%. If the company starts to borrow with a 25% debt ratio, what will be the levered beta using Hamada’s equation? What is the cost of equity before and after the recapitalization respectively? Why is the cost of equity higher after the recapitalization?
Suppose the 10-year T-bond rate is 3%. The Market Risk Premium is 5%. The equity beta for the firm is 1.5. What is the cost of equity using the Capital Asset Pricing Model (CAPM)? a. 7.5% b. 9.5% c. 10.5%
Example The following data were assembled for General Stores Corporation: Equity (Market Risk) Premium: 4.9% Size Premium: 1.8% Value Premium: 3.0% Current Risk-Free Rate: 3.5% Market Beta: 1.05 Size Beta: -0.315 Value Beta: -0.224 Using the data above, estimate General Stores' cost of equity using the Fama- French Model.
Dhofar Power company has a beta of 1.5. The risk free rate on a treasury bill is currently 4% and the market return has averaged 18 %.What is the cost of the equity. Select one: a. 24 % b. None of these c. 25 % d. 22 %
Sub : FinancePls answer very fast.I ll upvote. Thank You An all-equity company decides to recapitalize. The company has an unlevered beta of 1.1, the market risk premium is 6% and the risk-free rate is 5%. The company's tax rate is 25%. If the company starts to borrow with a 25% debt ratio, what will be the levered beta using Hamada’s equation? What is the cost of equity before and after the recapitalization respectively? Why is the cost of equity higher after the recapitalization?
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The risk free rate of return is 7% the average market return is 11% A) what will be the return rate expected from a share whose beta factor is o.9 B) what would be the expected value if it is expected to earn an annual dividend of 5.3c with no capital growth

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