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spread, equity market volatility, and equity market risk premium. Post's beta in the U.S. equity market is 0.80. On average, US companies generate 6.0% of total revenue from China, 2.7% of total revenue from Japan, 2.4% from UK, and 1.9% from Canada. Country United Canada UH

spread, equity market volatility, and equity market risk premium. Post's beta in the U.S. equity market is 0.80. On average, US companies generate 6.0% of total revenue from China, 2.7% of total revenue from Japan, 2.4% from UK, and 1.9% from Canada. Country United Canada UH

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Below shows Post Holdings, Inc. (ticker: POST)'s revenue by country, and each countries' government bonds rate, CDS spread, equity market volatility, and equity market risk premium. Post's beta in the U.S. equity market is 0.80. On average, US companies generate 6.0% of total revenue from China, 2.7% of total revenue from Japan, 2.4% from UK, and 1.9% from Canada. Country United Canada UK States % of Total Revenue - IBM 86.1 5.4 8.5 10-Year Government Bonds Yield 1.301% 1.242% 0.522% CDS Spread 1.722% 4.793% 2.289% Equity Market Volatility 10% 15% 12% Equity Market Risk Premium 4.72% 4.72% 5.31% Q. Assume POST's stock risk exposure to each country risk is proportional to B and country risk premium on each foreign market is calculated with equity market volatilities. Please calculate the appropriate cost of equity for POST.
Transcribed Image Text:Below shows Post Holdings, Inc. (ticker: POST)'s revenue by country, and each countries' government bonds rate, CDS spread, equity market volatility, and equity market risk premium. Post's beta in the U.S. equity market is 0.80. On average, US companies generate 6.0% of total revenue from China, 2.7% of total revenue from Japan, 2.4% from UK, and 1.9% from Canada. Country United Canada UK States % of Total Revenue - IBM 86.1 5.4 8.5 10-Year Government Bonds Yield 1.301% 1.242% 0.522% CDS Spread 1.722% 4.793% 2.289% Equity Market Volatility 10% 15% 12% Equity Market Risk Premium 4.72% 4.72% 5.31% Q. Assume POST's stock risk exposure to each country risk is proportional to B and country risk premium on each foreign market is calculated with equity market volatilities. Please calculate the appropriate cost of equity for POST.
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