12. With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, Using CAPM method compute for the cost of equity. 100
Q: Q2: By using CAPM calculate the required return on equity if Risk free rate is 18%, Expected Market…
A: Given Information: Risk-free Rate=18% Beta=1.5 Expected Market Return=20%
Q: Energy Services has a Beta = 1.6. The risk free rate on a treasury bill is currently 4.05% and the…
A: The given problem can be solved using capital asset pricing model.
Q: With risk free rate of 5%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax…
A: Risk free rate = 5% Beta = 1.50 Market return = 8% Credit spread = 3% Tax rate = 30% Equity ratio =…
Q: Alpha Inc.'s beta is 1.2, the risk-free rate is 10 percent, and the market risk premium is 5…
A: Given details are : Risk free rate = 10% Beta = 1.2 Market risk premium = 5% From these details we…
Q: The current risk-free rate of return is 4.6%. The market risk premium is 6.6%. D'Amico Co. has a…
A: As per CAPM Cost of equity = Risk free rate + beta * Market risk premium
Q: The current risk-free rate of return is 4.2%. The market risk premium is 6.6%. Allen Co. has a beta…
A: In the given question we require to calculate the Allen's Cost of Equity from the following details:…
Q: 16
A: MARKET RISK PREMIUM (MARKET RETURN - RISK FREE RATE) = 9%BETA= 1.4RISK FREE RATE = 3%
Q: With risk-free rate of 5%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax…
A: Risk free rate (Rf) = 5% Beta = 1.5 Market return (Rm) = 8% Credit spread = 3% Tax rate (T) = 30%…
Q: 13. The appropriate WACC of a firm is 6.43%. With risk-free rate of 4%, market return of 8%,…
A: Correct option is C. 1.50 Volatility of stocks or beta is 1.50 Explanation: Step 1 : Computation…
Q: 16. With risk-free rate of 5% Beta of 1.5, Market return of 8% prevailing credit spread of 3%, tax…
A: Weighted Average Cost of Capital= cost of equity x equity % + cost of debt x debt % cost of equity =…
Q: The current risk-free rate of return in the economy is 6%, in addition, the market rate of return is…
A: Expected rate of return is the profit to achieved by investing in a particular stock or bonds. CAPM…
Q: Maria Kajia is now evaluating company XYZ. The risk-free rate to be 3.65%, yield on company XYZ…
A: The Weighted Average Cost of Capital (WACC) is commonly referred as organization/ company/firm's…
Q: The current risk-free rate of return (rRf) is 4.67% while the market risk premium is 5.75%. The…
A: According to the CAPM model the cost of equity is the sum of the risk free rate plus the product of…
Q: Dhofar Power company has a beta of 1.5. The risk free rate on a treasury bill is currently 4% and…
A: Cost of capital refers to the cost of obtaining funds to meet the financial requirement. It is the…
Q: Your estimate of the market risk premium is 5%. The risk-free rate of return is 1% and General…
A: Given:
Q: Calculate the firm's expected return using the capital asset pricing model: Risk Free Rate: 3%…
A: In the given question we are required to calculate firm's expected return using capital asset…
Q: A firm's stock has a beta of 1.75, Treasury bills yield 3.8%, and the market portfolio offers an…
A: Risk Premium: The rate of return on an investment that is in addition to the risk-free rate of…
Q: If the firm's beta is 1.75, the risk-free rate is 8%, and the average return on the market is[12%,…
A: Risk free rate = 8% Market return = 12% Beta = 1..75
Q: 2 local Philippine equities have the same risk (standard deviation) and return expectations: 10 %…
A: Expected Rate of return of a portfolio is calculated as: Expected…
Q: 10. Using Capital Asset Pricing Method (CAPM), compute for the cost of capital (equity) with…
A: Answer: Calculation of the cost of capital (equity) Formula as per CAPM, Cost of equity = Risk free…
Q: 8-14 The current risk-free rate of return, ro, is 3 percent RP and the market risk premium, RP is 6…
A: Given data; Risk free rate= 3% Market Risk premium = 6% Beta co-efficient = 1.5
Q: The expected return on the market portfolio is 15%. The risk-free rate is 8%. The expected return on…
A: In the given question we need to calculate the Alpha of the stock. Alpha of the stock = Expected…
Q: The current risk-free rate of return, rRF, is 4 percent and the market risk pre- mium, RPM, is 5…
A: Hi, since there are multiple questions posted, we will answer first question. If you want any…
Q: 9) Firm X and Y each have a beta of 1.5 and 2.5. If their expected return (cost of equity) is each…
A: CAPM = Rf + Beta ( Rm - Rf)
Q: The current risk-free rate of return is 4.67%, while the market risk premium is 6.63%. The D'Amico…
A: In the given question we need to compute the D'Amico's cost of equity using Capital asset pricing…
Q: Using CAPM, compute for the cost of capital (equity) with risk-free rate of 5%, market return of 12%…
A: The cost of equity capital can be computed by using the CAPM equation
Q: Risk free rate of return is 5%, expected market return is 10%, cost of equity is 15% then value of…
A: The beta of the firm can be calculated with the help of CAPM equation.
Q: What is the beta of a firm whose equity has an expected return of 21.3 percent when the risk-free…
A: Beta = ( Expected retrun -risk free rate) / (market return - risk free rate )
Q: ofar Energy Services has a Beta = 1.6. The risk free rate on a treasury bill is currently 4.05% and…
A: The given problem can be solved using capital asset pricing model.
Q: Based on the following information, estimate the justified leading P/E ratio Return on Equity:…
A: Given, The EPS is $6.20 Return on equity (r) is 18% Growth rate (g) is 6.09%
Q: Suppose your company has an equity beta of 0.5 and the current risk-free rate is 6.0%. If the…
A: Beta coefficient shows the systematic risk of the assets. The beta factor shows the systematic risk…
Q: Salalah Oil,has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is…
A: Cost of equity means cost of raising the money from common stock holder. Formula for cost of equity…
Q: 2- Assume that the market has an expected return of 12% and volatility (standard deviation) of 20%.…
A: First we'll calculate Beta for company X Beta=Covariance(X,M)VarianceM Beta could also be calculated…
Q: The Graber Corporation's common stock has a beta of 1.15. The risk-free rate 3.5 percent and the…
A: Expected return =risk free rate + beta * (market return - risk free rate )
Q: 18f
A: Calculate the cost of equity as follows: Cost of equity = Risk free rate + (Beta * Market risk…
Q: 17. With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailing credit spread of 3% and…
A: We need to use CAPN method to calculate cost of equity Cost of equity =Risk free rate+Beta(market…
Q: Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50%debt and has a levered…
A: Formula to calculate the required return when there is no debt for the company is: r = Rf + bu RPm…
Q: Your estimate of the market risk premium is 5%. The risk-free rate of return is 2% and General…
A: Cost of Equity refers to annual cost that is incurred by entity for having equity in their capital…
Q: Diddy corp. has a beta of 1.3. The current risk-free rate is 3 percent and the expected return on…
A: Following details are given in the question for Diddy corp. : Beta of Stock = 1.3 Risk free rate =…
Q: The cost of equity using the CAPM approach The current risk-free rate of return (rRF) is 3.86%,…
A: In the given question we require to compute the Monroe's cost of equity. As per Capital asset…
Q: . The appropriate WACC of a firm is 6.77%. With market return of 8%, prevailing credit spread of 3%,…
A: WACC = 6.77% Rm = 8% Let the risk free rate = Rf Weight of equity = 30% Weight of debt = 70%
Q: Suppose Simmons' common stock has a beta of 1.37, the risk-free rate is 3.4% and the market risk…
A: Cost of equity is calculated by CAPM: Cost of equity = Rf + ß*(Rm-Rf) Weight of equity = 1/(1+D/E…
Q: What is the cost of equity for a firm if the firm's equity has a beta of 1.4, the risk-free rate of…
A: Relevant information: Beta : 1.4 Risk free rate : 3% Expected return on market : 10% Cost of equity…
Q: The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. If the…
A: Using CAPM Model,
Q: XYZ has a beta coefficient of 1.76. Estimate its cost of equity if the risk-free rate is 8% and…
A: cost of equity = Risk free rate + beta * (Return from market - risk free rate)
Q: Your estimate of the market risk premium is 6%. The risk-free rate of return is 1% and General…
A: The Capital Asset Pricing Model (CAPM) is a model that gives the connection between the normal…
Q: Dhofar Power company has a beta of 1.5. The risk free rate on a treasury bill is currently 4% and…
A: Cost of equity is the expected return which the equity shareholder expect the company to pay.
Q: The firm's beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the…
A: As per CAPM, Cost of equity = Risk free Rate + Beta * (Market return - Risk free Rate)
Q: Ethier Enterprise has an unlevered beta of 0.5. Ethier is financed with 25% debt and has a levered…
A: Given, Unlevered Beta = 0.50 Debt = 25%, Levered Beta = 0.6 Risk free rate = 3.50% Market risk…
Q: What is the market return if the company's cost of equity is 11.68% and the company has a beta…
A: Given information: Cost of equity is 11.68% Beta coefficient is 1.8 Expected risk free return is…
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- Premium for Financial Risk Ethier Enterprise has an unlevered beta of 1.0. Ethier is Financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.5% and the market risk premium is 6%, how much is the additional premium that Ethier’s shareholders require to be compensated for financial risk?Vargo, Inc., has a beta estimated by Value Line of 1.3. The current risk-free rate (long-term) is 3.5 percent and the market risk premium is 6.4 percent. What is the cost of common equity for Vargo?Assume that the Collins Company has a beta of 1.8 and that the risk-free rate of return is 2.5 percent. If the equity-risk premium is six percent, calculate the cost of equity for the Collins Company using the capital asset pricing model.
- The current risk-free rate of return (rRf) is 4.67% while the market risk premium is 5.75%. The Burris Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach, Burris’s cost of equity is? A 9.96 B) 8.964 C) 11.952 D) 10.458Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%. Company $1 Discount Store Everything $5 Forecasted return 12% 11% Standard deviation of returns 8% 10% Beta 1.5 1.0 What would be the fair return for each company according to the capital asset pricing model (CAPM)?A firm's stock has a beta of 1.75, Treasury bills yield 3.8%, and the market portfolio offers an expected return of 9.5%. In addition to equity, the firm finances 26% of its assets with debt that has a yield to maturity of 7.4%. The firm is in the 28% marginal tax bracket. (b) Calculate the cost of equity. (c) In your own words, briefly explain the capital asset pricing model (CAPM) you used for answering part (b).
- The appropriate WACC of a firm is 6.77%. With market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, what is the risk free rate of the firm with Beta of 1.5? a. 4% b. 5% c. 6% d. 7%A company’s equity is valued at $10 million and debt is valued at $2 million. Its bonds tradeat the risk-free rate of 2%. If its WACC is 12.2% and its CAPM equity beta is 0.8, what must be theexpected rate of return on market portfolio? Assume that tax rate is 40%.Intuit Inc. (INTU) has a capital structure of 38% debt and 62% equity. The expected return on the market is 6.31%, and the risk-free rate is 2.04%. What discount rate should an analyst use to calculate the net present value (NPV) of a project with an equity beta of 1.08 if the firm’s after-tax cost of debt is 5.56%? A. 3.98%. B. 4.70%. C. 5.48%. D. 6.23%.
- DraftKings Inc (DKNG) has a capital structure of 29% debt and 71% equity. The expected return on the market is 7.65%, and the risk-free rate is 2.41%. What discount rate should an analyst use to calculate the NPV of a project with an equity beta of 1.22 if the firm’s after-tax cost of debt is 4.26%? A. 3.15% B. 5.18% C. 7.49% D. 9.01%1. If the return on the market portfolio is 10% and the risk-free rate is 5%, what is the effect on a company's required rate of return on its stock of an increase in the beta coefficient from 1.2 to 1.5? 3% increase No change 1.5% decrease 1.5% increase 2. Grateway Inc. has a weighted average cost of capital of 11.5 percent. Its target capital structure is 55 percent equity and 45 percent debt. The company has sufficient retained earnings to fund the equity portion of its capital budget. The before-tax cost of debt is 9 percent, and the company’s tax rate is 30 percent. If the expected dividend next period (D1) is P5 and the current stock price is P45, what is the company’s growth rate? 4.64% 2.68% 6.75% 8.16% 3.44% 3. A firm has common stock with a market price of P55 per share and an expected dividend of P2.81 per share at the end of the coming year. The dividends paid on the outstanding stock over the past five years are as follows: Year Dividend…You know that the return of Momentum Cyclicals common shares is 1.4 times as sensitive to macroeconomic information as the return of the market. If the risk-free rate of return is 1.80 percent and market risk premium is 3.71 percent, what is Momentum Cyclicals’ cost of common equity capital? (Round intermediate calculation to 5 decimal places, e.g. 1.25140 and final answer to 2 decimal places, e.g. 15.25%.)
