You have been asked to estimate the beta for a large South Korean company, with large...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You have been asked to estimate the beta for a large South Korean company, with large holdings in steel and financial services. You have collected the average betas for global companies in each of the sector, as well as the average debt-to-equity ratios in each sector: Average Beta 1.18 Average DE ratio Sector Steel Financial services The average tax rate is 70%. In the most recent period the company you are analyzing earned 70% of its operating income from steel and 30% from financial services. It also had a debt-t0 equity ratio of 150% and a tax rate of 30% 1.14 70% 30%. a. Estimate the beta of the company 2.13 b. If the Korean government bond rate in USD is 12%, Korean rating is BBB and Korean equities are twice as volatile as Korean bonds, estimate the: i. Risk-free rate 10% ii. Market risk premium 4% Cost of equity for this company valued in USD. 18.53% 111. You have been asked to estimate the beta for a large South Korean company, with large holdings in steel and financial services. You have collected the average betas for global companies in each of the sector, as well as the average debt-to-equity ratios in each sector: Average Beta 1.18 Average DE ratio Sector Steel Financial services The average tax rate is 70%. In the most recent period the company you are analyzing earned 70% of its operating income from steel and 30% from financial services. It also had a debt-t0 equity ratio of 150% and a tax rate of 30% 1.14 70% 30%. a. Estimate the beta of the company 2.13 b. If the Korean government bond rate in USD is 12%, Korean rating is BBB and Korean equities are twice as volatile as Korean bonds, estimate the: i. Risk-free rate 10% ii. Market risk premium 4% Cost of equity for this company valued in USD. 18.53% 111.
Expert Answer:
Answer rating: 100% (QA)
From the information provided above we first need to calculate the beta ... View the full answer
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
Students also viewed these finance questions
-
You have been asked to estimate the per unit selling price of a new line of clothing. Pertinent data are as follows: Direct labor rate: ............................... $15.00 per hour Production...
-
You have been asked to estimate the beta of a high-technology firm that has three divisions with the characteristics shown in Table. a. What is the beta of the equity of the firm? b. If the risk-free...
-
As a securities analyst you have been asked to review a valuation of a closely held business, Wigwam Autoparts Heaven, Inc. (WAH), prepared by the Red Rocks Group (RRG). You are to give an opinion on...
-
inary Differential Equations > Assessment 10.1-10.2 Score: 0.25/3 1/3 answered "X" Question 2 < Submit Question > Gradebook Convert the differential equation `u" -3 u' -4 u = e^(-t)` into a system of...
-
What factors affect region/community location decision?
-
Financial statement information about four different companies is as follows. Instructions (a) Determine the missing amounts. For example, to solve for (a), Assets - Liabilities = Equity = $25,000....
-
You need to understand the approach described in question 3 in More Genetic TIPS before answering this question. A muscle-specific gene was cloned and then subjected to promoter bashing. As shown...
-
Answer each of the questions in the following unrelated situations. (a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $500,000,...
-
Question 2 Consider a monopsonist with the following relationship between wage and labor: and the following production function w= a+bL f(K, L) = ln(L) + In(K) (3) (4) 1. Write the short run profit...
-
What are the benefits of businesses? Can a business negatively affect society? Give one example of a business that is benefiting society and one example of a negative effect.
-
If you invest $35,000 today in exchange for a 6.75 percent, 20-year annuity, what will the annual cash flow be? a. 3,239.83 b. 1,598.26 c. 4,236.15 d. 3,956.28
-
Your firm has Net fixed assets of 2 , 4 0 0 and Fixed asset turnover ratio of 1 1 . 5 0 . What is the number of sales?
-
Factors that influence of corporate characteristics include the following except a. M N Cs Cash Flow Stability M N Cs with more stable cash flows can handle more debt because there is a constant...
-
Select all that apply Describe the general ledger after adjusting and closing entries have been posted. (Check all that apply.) Multiple select question. The Dividends account will have a $0 balance...
-
In 1981, Ronald Reagan was a newly elected president with tremendous popular support and a vision for tax reform. But whether he could get the support he needed in Congress to implement his vision...
-
The topic is unemployment crisis in Tasmania. Following this structure below, including references. the word count is 2500 -abstract -intro -reason -dilenmma -economic tool: game theory, benefit cost...
-
An individual investor is subject to a 30 percent tax on dividends and 20 percent tax on capital gains, how much does the investor receive for $2/share in capital gains? Question 12 options: $1.40...
-
San Carlos Bank and Trust Company uses a credit-scoring system to evaluate most consumer loans that amount to more than $2,500. The key factors used in its scoring system are found at the conclusion...
-
A company that manufactures automobile parts is weighing the possibility of investing in an FMC (Flexible Manufacturing Cell). This is a separate investment and not a replacement of the existing...
-
Javier just bought a condominium in College-town, USA. His $100,000 mortgage is 6% compounded monthly, and Javier will make monthly payments on his loan for 30 years. In addition, property taxes and...
-
Qwest Airlines has implemented a program to recycle all plastic drink cups used on their aircraft. Their goal is to generate $5 million by the end of the recycle program's five-year life. Each...
-
Discretize the product of two functions, as compared to discretizing each function independently, and describe what that means in the language of kets.
-
Show how \(\delta^{\prime \prime}(x-y)\) (the second derivative with respect to \(x\) ) acts as a distribution on functions.
-
For a tensor product of kets, describe what the norm is in the abstract sense, and then in the function form (with integrals).
Study smarter with the SolutionInn App