Ramsay Films has two businesses making movie and running theatres. The movie - making business has an unlevered beta of 1.1 and the theatres business has an unlevered beta of 0.9. The firm has equal weight in both businesses and a debt - equity ratio of 0.2. The risk - free rate is 6% and the market risk premium is 5%. The firm just paid a dividend of Rs. 7 per share out of its total earnings of Rs. 10 per share. The ROE for the first is 20%. If the firm is already stable, what is the value of its shares? The tax rate is 30%. a. 108.48 b. 130.18 с. 118.34 d. 141.27

There are two firms in the same business: Air Wolf and Red Wolf. Both are in the same risk class, and each has an EBIT (Earnings Before Interest & Taxes) of $10 million. Air Wolf has no debt and Red Wolf has $4 million of debt. The cost of equity is 8% and the cost of debt is 10%. Assume a tax rate of 30%. Calculate the: (a) total value of each firm and (b) the breakdown of value or capital structure in terms of its components (debt & equity).

Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%. a. Use the CAPM to estimate the firm's cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of equity % b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.) Cost of equity % c. Which of the two estimates is more reasonable?

Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%.   a. Use the CAPM to estimate the firm’s cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)           b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)

concatti corporation hired your consulting firm to help them estimate the cost of equity. the yeild on the firms bonds is 10.50% and your firms economist believe that the cost of equity can be estimated using a risk premium of 4.85% over a firms own cost of debt. what is an estimate of the firms cost of equity from retained earnings?

Kalil, Inc. (a for-profit college), has the following data: average stock return (market rate of return) is 7%; market risk premium is 5%. and b = 0. What is the firm's cost of equity (k) from retained earnings based on the CAPM? 12

FINA's business risk (Ru) is 9% in the industry. The debt-to-equity ratio is 0.4. The cost of debt is 3%. The tax rate is 20%. What is the required return of equity (Re)?

Please provide a written out by hand solution for the above example.?

3. Walter and Gordon model analyse the impact of distribution of dividends on thevaluation of the firm but the formula used in both the cases are different. CompanyABC Ltd wanted to evaluate the price of the share in both cases. The company earns ₹50 per share and expects the same for the next year. The cost of capital to the firm is11%. The company earns return on investment of 15% and the firm is planningdividend payout ratio of 60%. Calculate:a. Price of the share using Walter Model. Comment on the relationship between return oninvestment and cost of capital in the case above and decision of the firm whetherdividend is to be declared or not. b. Price of the share using Gordon model. Comment on the relationship between return oninvestment and cost of capital in the case above and decision of the firm whetherdividend is to be declared or not.

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