Sinaloa Appliance, Incorporated, a private firm that manufactures home appliances, has hired you to estimate the company's beta. You have obtained the following equity betas for publicly traded firms that also manufacture home appliances. Firm iRobot Middleby's National Presto Newell Brands Whirlpool Asset beta Beta 0.89 1.84 0.09 I 1.04 1.74 Debt $0 747 11,918 4,495 ($ millions) Market Value of Equity $ 2,990 7,410 794 a. Estimate an asset beta for Sinaloa Appliance. Note: Round intermediate calculations and final answer to 3 decimal places. 26,270 13,910

Sinaloa Appliance, Incorporated, a private firm that manufactures home appliances, has hired you to estimate the company's beta. You have obtained the following equity betas for publicly traded firms that also manufacture home appliances. Firm iRobot Middleby's National Presto Newell Brands Whirlpool Asset beta Beta 0.89 1.84 0.09 I 1.04 1.74 Debt $0 747 11,918 4,495 ($ millions) Market Value of Equity $ 2,990 7,410 794 a. Estimate an asset beta for Sinaloa Appliance. Note: Round intermediate calculations and final answer to 3 decimal places. 26,270 13,910

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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S Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $10 per share and has a beta of 0.9. There are 4 million common shares outstanding. The market risk premium is 8%, the risk-free rate is 4%, and the firm's tax rate is 21%. Assets Cash and short-term securities $ 3.0 Accounts receivable. 3.0 Inventories Plant and equipment Total 7.0 25.0 $ 38.0 a. Market debt-to-value ratio b. WACC BOOK-VALUE BALANCE SHEET (Figures in 5 millions) Liabilities and Net Worth Bonds, coupon 5%, paid annually (maturity 10 years, current yield to maturity = 7%) Preferred stock (par value $20 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? Note: For all the requirements, do not round intermediate calculations. Enter your…
Assume that Amazon is also considering investing in the carwash business. In terms of capital structure, Amazon and Spffiy have a similar level of debt -- let's assume that their capital structure (% of debt vs. % of market value of equity) is identical. The Beta for Spffiy stock is 0.54. The Beta for Amazon's stock Is 1.81. Based on this information please answer the following: 1) Which company, Spiffy or Amazon, would you assume (based on the above) to have a lower WACC? Why? 2) Based on your answer to question 1, based on the NPV tool, to which company would investment in the carwash business look more attractive. 3) Does it make sense for bothSpiffy and Amazon to use their company wide WACC to evaluate an investment in the carwash business? Why or why not?
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2019. Also assume that the firm’s equity beta is 1.20, the risk-free rate is 2.65 percent, and the market risk premium is 7.0 percent. Dividends per share $ 2.26 Return on equity 9.50 % Book value per share $ 18.70 Earnings Cash Flow Sales 2019 value per share $ 5.00 $ 6.30 $ 25.65 Average price multiple 13.10 9.53 2.47 Forecasted growth rate 13.59 % 11.30 % 7.23 % Using the PE, P/CF, and P/S ratios, estimate the 2020 share price for Beagle Beauties.
F2 A few publicly listed home appliance manufacturing companies have the following beta, debt, and equity: Company Beta Debt Equity Apple 1.4 ₹ 2,500 ₹ 3,000 Pear 1.2 ₹ 5 ₹ 200 Grape 1.2 ₹ 540 ₹ 2,250 Tomato 0.7 ₹ 8 ₹ 300 Watermelon 1.5 ₹ 2,900 ₹ 4,000 Calculate the beta of the industry keeping in mind the publicly listed sector only, with a debt equity ratio of 25%. (Assume a Tax Rate for all companies at 35%) (Hint- One way is to compute the unlevered betas of each of the five firms and then average these unlevered betas and substitute it as the unlevered beta for a private company)
7. Your company is currently contemplating whether to buy Hot House, a national chain of computer systems consultants based in California. Your job is to estimate the market value of the equity in Hot House. To accomplish this task, you have gathered the following information. The estimated FCFF generated by Hot House for each of the next five years are as follows. CFF 1 $2,400 2 3 4 5 $2,910 $3,452 $4,452 $5,352 Subsequent to year 5, you estimate that the cash flows will grow at 6% indefinitely. Currently, the company has $5 million of debt outstanding, but that debt balance is expected to increase by 5% at the end of each year. Thus, the current debt balance of $5 million will increase to $5.25 million at the end of year 1, $5.5125 million at the end of year 2, etc. Fortunately, the before-tax cost of debt is expected to remain stable at 12%. Finally, you estimate that the required return on the unlevered equity is 16%. If the company has 1 million shares outstanding, what is the…
In mid-2015, Cisco Systems had a market capitalization of $124 billion. It had A-rated debt of $23 billion as well as cash and short-term investments of $60 billion, and its estimated equity beta at the time was 1.24. a. What is Cisco's enterprise value? b. Assuming Cisco's debt has a beta of zero, estimate the beta of Cisco's underlying business enterprise.
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year - end 2021. Also assume that the firm's equity beta is 1.40, the risk - free rate is 2.60 percent, and the market risk premium is 8.0 percent. Dividends per share $ 2.44 Return on equity 10.50% Book value per share $ 20.05 Earnings Cash Flow Sales 2021 value per share $ 5.00 $ 6.40 $ 25.65 Average price multiple 13.10 9.62 2.56 Forecasted growth rate 13.68% 11.21% 7.39% Using the PE, P/CF, and P/S ratios, estimate the 2022 share price for Beagle Beauties. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. DO NOT USE EXCEL please leave a key for the formula thank you
A private equity fund is targeting the acquisition of a warehouse located in Irving, Texas. Its research of the Irving market reveals the following: Property Type Cap Rate Vacancy OpEX (% of EGI) Retail 10.05% 6.17% 40.44% Office 8.65% 5.58% 48.74% Multifamily 7.26% 4.98% 53.72% Industrial 11.44% 6.77% 30.68% • If the projected first year net operating income (NOI) for the Irving warehouse is $44,500, what is the estimated value of the property using direct capitalization?
To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data about the company's stock: D1 $1.45; PO = $25; and g = 6.50% (constant). What is the cost of common from issuing new stock, assuming the flotation cost is 10% of the stock price? = 13.59% 11.10% 12.94% 11.68% 12.30%
You have been hired by the CFO of Lugones Industries to help estimate its cost of common equity. You have obtained the following data: (1) rd = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) rRF = 5.00%, RPM = 6.00%, and b = 1.25. (3) D1 = $1.20, P0 = $35.00, and g = 8.00% (constant). You were asked to estimate the cost of common based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference? 1.13% 1.50% 1.88% 2.34% 2.58%
You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.7, a debt-to-equity ratio of 0.7, and a tax rate of 20 percent. Based on this information, what is the asset beta for Lauryn's? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Lauryn's asset beta
You have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding Stock price per share Yield to maturity on debt Book value of interest-bearing debt Coupon interest rate on debt Market value of debt Book value of equity Cost of equity capital Tax rate a. What is the internal rate of return on the investment? Note: Round your answer to 2 decimal places. Internal rate of return I Weighted-average cost Burgundy is contemplating what for the company is an average-risk investment costing $38 million and promising an annual ATCF of $4.9 million in perpetuity. % b. What is Burgundy's weighted-average cost of capital? Note: Round your answer to 2 decimal places. 20 million % $39 7.5% $350 million 4.4% $ 245 million $ 410 million 11.8% 35%

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