EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202778
Author: DeMarzo
Publisher: PEARSON CUSTOM PUB.(CONSIGNMENT)
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 21P
In mid-2015, Cisco Systems had a market capitalization of $1 30 billion. It had A-rated debt of $25 billion as well as cash and short-term investments of $60 billion, and its estimated equity beta at the time was 1.11.
- a. What is Cisco’s enterprise value?
- b. Assuming Cisco’s debt has a beta of zero, estimate the beta of Cisco’s underlying business enterprise.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In June 2009, Cisco Systems had a market capitalization of $113 billion. It had A-rated debt of $14 billion as well as cash and short-term investments of $34 billion, and its estimated equity beta at the time was 1.28.
a. What is Cisco's enterprise value?
b. Assuming Cisco's debt has a beta of zero, estimate the beta of Cisco's underlying business enterprise.
a. What is Cisco's enterprise value?
Cisco's enterprise value is $
billion. (Round to the nearest integer.)
b. Assuming Cisco's debt has a beta of zero, estimate the beta of Cisco's underlying business enterprise.
The beta of Cisco's underlying business enterprise is. (Round to two decimal places.)
In mid-2015, Microsoft Corporation had a market capitalization of $340 billion, $35 billion in debt, and $96 billion in cash. If its estimated equity beta was 0.87, estimate Microsoft’s beta.
please show WRITTEN work!!!!
Give typing answer with explanation and conclusion
Pacific Enterprises has a market cap of $4.5 billion, $3.5 billion in debt, an equity beta of 1.1, and a debt beta of 0.10. Your estimate of the asset beta (unlevered beta), for Pacific Enterprises is closest to: Pacific Enterprises has a market cap of $4.5 billion, $3.5 billion in debt, an equity beta of 1.1, and a debt beta of 0.10. Your estimate of the asset beta (unlevered beta), for Pacific Enterprises is closest to: 0.42 0.71 0.66 1.1 0.59
13%
15%
12%
20%
16%
Chapter 12 Solutions
EBK CORPORATE FINANCE
Ch. 12.1 - According to the CAPM, we can determine the cost...Ch. 12.1 - What inputs do we need to estimate a firms equity...Ch. 12.2 - How do you determine the weight of a stock in the...Ch. 12.2 - Prob. 2CCCh. 12.2 - Prob. 3CCCh. 12.3 - How can you estimate a stocks beta from historical...Ch. 12.3 - How do we define a stocks alpha, and what is its...Ch. 12.4 - Why does the yield to maturity of a firms debt...Ch. 12.4 - Prob. 2CCCh. 12.5 - What data can we use to estimate the beta of a...
Ch. 12.5 - Prob. 2CCCh. 12.6 - Why might projects within the same firm have...Ch. 12.6 - Under what conditions can we evaluate a project...Ch. 12.7 - Prob. 1CCCh. 12.7 - Prob. 2CCCh. 12 - Prob. 1PCh. 12 - Suppose the market portfolio has an expected...Ch. 12 - Prob. 3PCh. 12 - Suppose all possible investment opportunities in...Ch. 12 - Using the data in Problem 4, suppose you are...Ch. 12 - Prob. 6PCh. 12 - Prob. 7PCh. 12 - Suppose that in place of the SP 500, you wanted to...Ch. 12 - Prob. 9PCh. 12 - You need to estimate the equity cost or capital...Ch. 12 - In mid-2012, Ralston Purina had AA-rated, 10-year...Ch. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Your firm is planning to invest in an automated...Ch. 12 - Consider the setting of Problem 18. You decided to...Ch. 12 - Prob. 20PCh. 12 - In mid-2015, Cisco Systems had a market...Ch. 12 - Weston Enterprises is an all-equity firm with two...Ch. 12 - Prob. 24PCh. 12 - Your company operates a steel plant. On average,...Ch. 12 - Prob. 26PCh. 12 - You would like to estimate the weighted average...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Relationship between required return and coupon rate. Introduction: Coupon rate: Coupon rate can be defined as,...
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
The present value of investment. Introduction: The present value is the current value of a future total of cash...
Corporate Finance
(Present value of a complex stream) Don Draper has signed a contract that will pay him $80,000 at the end of ea...
Foundations Of Finance
The differentiation between nominal annual rate (NAR) and effective annual rate (EAR) Introduction: Nominal ann...
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Define the expected rate of return to bondholders.
Foundations of Finance (9th Edition) (Pearson Series in Finance)
The bank charges $4,000 for closing costs on a $200,000 loan with an APR of 8.5% compounded monthly with a term...
Construction Accounting And Financial Management (4th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Apple’s market capitalization in mid-2016 was $484 billion, and its beta was 1.03. At that same time, the company had $25 billion in cash and $69 billion in debt. Based on this data, estimate the beta of Apple’s underlying business enterprise. please show written work!!arrow_forwardAn equity analyst, has determined that the appropriate ratio of Enterprise Value to EBITDA (EV/EBITDA) for Bulldogs Inc. is 10.2. The analyst has also collected the following forecasted information for Bulldogs Inc.: EBITDA = ₽22,000,000 Market value of debt = ₽56,000,000 Cash = ₽1,500,000 The value of equity for Bulldogs Inc. is closest to: a. ₽224 million. b. ₽100 million. c. ₽169 million. d. ₽281 millionarrow_forwardAn equity analyst, has determined that the appropriate ratio of Enterprise Value to EBITDA (EV/EBITDA) for Bulldogs Inc. is 10.2. The analyst has also collected the following forecasted information for Bulldogs Inc.: EBITDA = ₽22,000,000 Market value of debt = ₽56,000,000 Cash = ₽1,500,000 The value of equity for Bulldogs Inc. is closest to:arrow_forward
- Assume Bismuth Electronics has a book value of $6 billion of equity and a face value of $19.7 billion of debt. The market values of equity and debt are $2.5 billion and $18.5 billion. A Wall Street financial analyst determines values of equity and debt as $3 billion and $20 billion. Which of the following values should be used for calculating the firm's WACC? A) $6 billion of equity and $19.7 billion of debt B) $2.5 billion of equity and $20 billion of debt C) $3 billion of equity and $19.9 billion of debt D) $2.5 billion of equity and $18.5 billion of debtarrow_forwardBunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%. a. Use the CAPM to estimate the firm's cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of equity % b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.) Cost of equity % c. Which of the two estimates is more reasonable?arrow_forwardBunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%. a. Use the CAPM to estimate the firm’s cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)arrow_forward
- Trickster Industries has a market capitalization of $50 billion, $40 billion in BB rated debt, and $8 billion in cash. If Trickster's equity beta is 1.5, BB rated debt has a beta of 0.25, then Trickster's underlying asset beta is closest to: 0.72 1.01 1.62 1.19arrow_forwardBunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.5%, and the current dividend yield is 8.50%. Its beta is 1.33, the market risk premium is 14.50%, and the risk-free rate is 2.70%. a. Use the CAPM to estimate the firm's cost of equity. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. Now use the constant growth model to estimate the cost of equity. Note: Do not round intermediate calculations. Enter your answer as a whole percent. c. Which of the two estimates is more reasonable? a. Cost of equity % % c. Which of the two estimates is more reasonable? b. Cost of equityarrow_forwardHome Demo reports the following: Total liabilities = $38,633 million and Total assets = $42,966 million.(a) Compute Home Demo’s debt ratio.(b) Assuming Lows Hardware (a competitor) has a debt ratio of 60%, which company has higher risk from financial leverage?arrow_forward
- An analyst has determined that the appropriate EV/EBITDA for Rainbow Company is 9.6. The analyst has also collected the following forecasted information for Rainbow Company: EBITDA 21,520,490 = Market value of debt = 55,130,410 Cash 1,665,658 = Compute the value of equity for Rainbow Company. (Enter your answer as a number, rounded to the nearest whole number, like this: 1234) Type your answer...arrow_forwardThe 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?arrow_forwardconcatti corporation hired your consulting firm to help them estimate the cost of equity. the yeild on the firms bonds is 10.50% and your firms economist believe that the cost of equity can be estimated using a risk premium of 4.85% over a firms own cost of debt. what is an estimate of the firms cost of equity from retained earnings?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
FIN 300 Lab 1 (Ryerson)- The most Important decision a Financial Manager makes (Managerial Finance); Author: AllThingsMathematics;https://www.youtube.com/watch?v=MGPGMWofQp8;License: Standard YouTube License, CC-BY
Working Capital Management Policy; Author: DevTech Finance;https://www.youtube.com/watch?v=yj-XbIabmFE;License: Standard Youtube Licence