corporate finance question

Project Description:

6. the
following
tables
reflects
prices
of
the
s&p
500
as
well
as
a
publicly
traded
firm
for
the
past
24
months:
mystery s&p 500
june 2010 44.15 1030.71
july 44.41 1101.91
august 46.71 1039.70
september 50.49 1049.72
october 49.59 1141.20
november 54.39 1183.26
december 54.05 1180.55
january 2011 48.44 1257.64
february 48.90 1286.12
march 49.37 1327.22
april 50.14 1325.83
may 56.12 1363.61
june 47.70 1345.20
july 46.98 1320.64
august 45.42 1292.28
september 39.59 1218.89
october 31.77 1131.42
november 35.20 1253.30
december 35.90 1246.94
january 2012 32.07 1257.80
february 26.50 1312.41
march 28.31 1365.68
april 33.72 1408.47
may 32.09 1397.91
a. what
is
the
beta
of
“mystery”?
b. mystery
currently
has
debt
valued
at
$1
million
with
a
market
value
for
equity
of
$6
million.
mystery
pays
34%
in
taxes,
the
current
debt
cost
is
5.5%;
the
risk
free
rate
is
2%
and
the
market
premium
is
7%.
what
is
the
cost
of
capital?
c.
assume
that
mystery
decides
to
borrow
an
additional
$1
million
with
the
result
that
the
interest
rate
on
all
debt
increases
to
6%
but
the
tax
rate,
risk
free
rate
and
market
premium
remain
constant.
compute
the
new
levered
beta
and
associated
cost
of
capital.
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