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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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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