Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 14, Problem 18P

In mid-2015 Qualcomm Inc. had $11 billion in debt, total equity capitalization of $89 billion, and an equity beta of 1.43 (as reported on Yahoo! Finance). Included in Qualcomm’s assets was $21 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 3% and the market risk premium is4%.

  1. a. What is Qualcomm’s enterprise value?
  2. b. What is the beta of Qualcomm’s business assets?
  3. c. What is Qualcomm’s WACC?
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The total value (debt plus equity) of Wilson Dover Inc. is $500 million and the face value of its 1 - year coupon debt is $200 million. The volatility (\ sigma) of Wilson Dover's total value is 0.60, and the risk free rate is 5%. Assume that N(d1) = 0.9720 and N(d2) = 0.9050. Refer to the data for Wilson Dover Inc. What is the value (in millions) of Wilson Dover's debt if its equity is viewed as an option? a. $247.82 b. $186.19 c. $167.57 d. $204.81 e $225.29
The total value (debt plus equity) of Wilson Dover Inc. is $500 million and the face value of its 1-year coupon debt is $200 million. The volatility (σ) of Wilson Dover's total value is 0.60, and the risk-free rate is 5%. Assume that N(d1) = 0.9720 and N(d2) = 0.9050.Refer to the data for Wilson Dover Inc. What is the yield on Wilson Dover's debt?   a. 7.05%     b. 6.70%     c. 6.04%     d. 7.42%     e. 6.36%
The following were gathered for estimating the cost of equity of KKK Corporation: Return on Treasury Bonds = 4%; Return on the Market = 10%; Return on KKK Bonds = 6%. Upon analysis, you determined that the beta of KKK shares relating to the market return is 1.2 while a risk premium of 4% should be given to KKK's investors over its creditors. How much is the cost of equity using the capital asset pricing model?

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Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

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