SuperSky Plc issued shares, where the covariance between the SuperSky Pic shares and the UK stock market index is 24, while the variance of the market is 30. The yield on the UKtreasury bills (gilts) currently is 5%, and the return on the UK stock market index is 13%. What is the company's cost of equity?OA 13%OB 11.4%OC. 15.4%OD. None of the options are correct

Answered: Image /qna-images/answer/d1985b1b-4940-4d37-957e-54517d4109b5.jpg

SuperSky Pic issued shares, where the covariance between the SuperSky Pic shares and the UK stock market index is 24, while the variance of the market is 30. The yield on the UK treasury bills (gits) currently is 5%, and the return on the UK stock market index is 13%. What is the company's cost of equity? OA 13% OB 114% OC 15.4% OD. None of the options are correct

SuperSky Pic issued shares, where the covariance between the SuperSky Pic shares and the UK stock market index is 24, while the variance of the market is 30. The yield on the UK treasury bills (gits) currently is 5%, and the return on the UK stock market index is 13%. What is the company's cost of equity? OA 13% OB 114% OC 15.4% OD. None of the options are correct

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 4FPE: The Castle Company recently reported net profits after taxes of $15.8 million. It has 2.5 million...

See similar textbooks

Similar questions

First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0506. The standard deviation of the returns on the market portfolio is 23 percent and the expected market risk premium is 6.5 percent. The company has bonds outstanding with a total market value of $56.8 million and a yield to maturity of 6.8 percent. The company also has 6 million shares of common stock outstanding, each selling for $33. The company’s CEO considers the firm’s current debt-equity ratio optimal. The corporate tax rate is 23 percent and Treasury bills currently yield 4.4 percent. The company is considering the purchase of additional equipment that would cost $58 million. The expected unlevered cash flows from the equipment are $19.1 million per year for 5 years. Purchasing the equipment will not change the risk level of the firm. Calculate the NPV of the project. Very much struggling with setting this up and solving this problem.
The total book value of WTC’s equity is $14 million, and book value per share is $28. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firm’s bonds have a face value of $10 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 5%, and the firm’s tax rate is 21%. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
he total book value of WTC’s equity is $7 million, and book value per share is $14. The stock has a market-to-book ratio of 1.5, and the cost of equity is 12%. The firm’s bonds have a face value of $4 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 9%, and the firm’s tax rate is 21%. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) WACC= ______%
The market capitalization rate on the stock of Aberdeen Wholesale Company is 14%. Its expected ROE is 15%, and its expected EPS is $6. If the firm's plowback ratio is 60%. Calculate its P/E ratio.
First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0501. The standard deviation of the returns on the market portfolio is 22 percent and the expected market risk premium is 6.6 percent. The company has bonds outstanding with a total market value of $56.7 million and a yield to maturity of 6.9 percent. The company also has 5.9 million shares of common stock outstanding, each selling for $34. The company’s CEO considers the firm’s current debt-equity ratio optimal. The corporate tax rate is 22 percent and Treasury bills currently yield 4.3 percent. The company is considering the purchase of additional equipment that would cost $57.5 million. The expected unlevered cash flows from the equipment are $18.95 million per year for 5 years. Purchasing the equipment will not change the risk level of the firm. Calculate the NPV of the project.
First and Goal Corporation’s stock returns have a covariance with the market portfolio of .0486. The standard deviation of the returns on the market portfolio is 19 percent and the expected market risk premium is 6.9 percent. The company has bonds outstanding with a total market value of $56.4 million and a yield to maturity of 6.6 percent. The company also has 5.6 million shares of common stock outstanding, each selling for $37. The company’s CEO considers the firm’s current debt-equity ratio optimal. The corporate tax rate is 24 percent and Treasury bills currently yield 4 percent. The company is considering the purchase of additional equipment that would cost $56 million. The expected unlevered cash flows from the equipment are $18.5 million per year for 5 years. Purchasing the equipment will not change the risk level of the firm. What is the NPV of the project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal…
A company expects EPS to be $8.81 next year. The industry average P/E ratio is 34.84 and Enterprise multiple is 11.23. The EBITDA for the company is $20.78 million. What is an estimate of the stock price using the method of comparables for P/E multiples? Round your answer to two (2) decimal places.
Consider the following information for Federated Junkyards of America. Debt: $76,000,000 book value outstanding. The debt is trading at 91% of book value. The yield to maturity is 10%. Equity: 2,600,000 shares selling at $43 per share. Assume the expected rate of return on Federated’s stock is 19%. Taxes: Federated’s marginal tax rate is Tc = 0.21. Calculate the weighted-average cost of capital (WACC). (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
The standard deviation of stock returns of Park Corporation is60%. The standard deviation of the market return is 20%. If thecorrelation between Park and the market is 0.40, what is Park’sbeta? (1.2)
There are only shares of A and B companies in the market. Currently, the market value of A and B shares is $200 million and $300 million, respectively. In addition, the risk-free interest rate (Rf) is 5 per cent. The probability and rate of return for the future state of the two entities are given as follows: (Value values with a decimal place or higher to the fifth decimal place.) 1) Obtain the expected return and variance of Entity A and B, respectively. 2) When forming a market portfolio with two shares, obtain the expected return rate and variance and standard deviation of the market portfolio. 3) Calculate the beta of share A, and calculate the required yield of share A. state probability Ra Rb 1 0.3 0.30 0.20 2 0.4 0.15 -0.10 3 0.3 0.05 0.10
The following information relates to five stocks listed in five different sectors at the Nairobi Securities Exchange .The return on treasury bills is 4% and the average return in the market has been found to be 10% Estimated Return(%) Beta Sasini Ltd 8 0.7 Stanbic Holdings 6.2 1 Scan group Ltd 15 1.2 Crown Paints Kenya 10.5 1.4 Sanlam Kenya PLC 13 -0.4 Required: Using the capital asset pricing model (CAPM) determine the Required Rate of Return (RRR) for each stock and state whether it is undervalued, overvalued or fairly valued.
Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 8%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 12.70%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. ? %