The stock market data is given in the following table. Correlation Coefficients Telmex Mexico World Telmex 1.00 Mexico 0.90 1.00 World SD(%) R (%) 0.60 18 ? 0.75 15 14 1.00 10 12 The above table provides the correlations among Telmex, a telephone or communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is 9%. Required: Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Equity cost %
The stock market data is given in the following table. Correlation Coefficients Telmex Mexico World Telmex 1.00 Mexico 0.90 1.00 World SD(%) R (%) 0.60 18 ? 0.75 15 14 1.00 10 12 The above table provides the correlations among Telmex, a telephone or communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is 9%. Required: Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Equity cost %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The stock market data is given in the following table.
Correlation Coefficients
Telmex
Mexico
World
Telmex
1.00
Mexico
0.90
1.00
World
SD(%)
R (%)
0.60
18
?
0.75
15
14
1.00
10
12
The above table provides the correlations among Telmex, a telephone or communication company located in Mexico, the Mexico
stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R).
The risk-free rate is 9%.
Required:
Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm,
estimate Telmex's equity cost of capital.
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Equity cost
%
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