Your company has always assumed a cost of common equity capital of about 12.0%. An intern...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your company has always assumed a cost of common equity capital of about 12.0%. An intern you supervise at the firm recently gathered the information below, and you now want to run a check on that long-standing assumption. What is your good estimate of Re? the yield right now on a 5-year US Treasury note: 2.57% total liabilities: $14 million total shareholders' equity: $25 million company's stock beta: 1.19 5-year average return on the S&P 500: 10.78% YTM on the company's only bond issue: 4.20% Enter your response as a regular percentage rate, rounded to the nearest first decimal. Do not enter dollar signs, percent signs, or commas. Your company has always assumed a cost of common equity capital of about 12.0%. An intern you supervise at the firm recently gathered the information below, and you now want to run a check on that long-standing assumption. What is your good estimate of Re? the yield right now on a 5-year US Treasury note: 2.57% total liabilities: $14 million total shareholders' equity: $25 million company's stock beta: 1.19 5-year average return on the S&P 500: 10.78% YTM on the company's only bond issue: 4.20% Enter your response as a regular percentage rate, rounded to the nearest first decimal. Do not enter dollar signs, percent signs, or commas.
Expert Answer:
Answer rating: 100% (QA)
To calculate the cost of common equity capital Re using ... View the full answer
Related Book For
Introduction to Finance Markets Investments and Financial Management
ISBN: 978-1118492673
15th edition
Authors: Melicher Ronald, Norton Edgar
Posted Date:
Students also viewed these finance questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Audrey has recently purchased a home with a $325,000 mortgage. She opted for monthly payments, a term of 5 years at a rate of 3.2%, and an amortization period of 25 years. Had Audrey chosen, instead,...
-
Potholes on a highway can be a serious problem and are in constant need of repair. With a particular type of terrain and make of concrete, past experience suggests that there are, on the average, 2...
-
A client sues Jane Corning, an independent accountant, for negligence, alleging that, because she failed to apply generally/ accepted auditing standards, she failed to discover large thefts of...
-
The accounts and June 30, 2007, balances of Cromwell Company are arranged in no particular order: Requirements 1. Prepare the company's classified balance sheet in account format at June 30, 2007. 2....
-
Blue Corporation donates the following property to The Corporate Income Tax? Corporations Johnson Elementary School: XYZ Corporation stock purchased two years ago for $25,000. The stock has a...
-
While both casinos and cruise ships have betting games in their establishments, what is one major difference between the two that have legal and social implications? Justify your position and provide...
-
Background: In the initial contract negotiation stage, the contract price with SM was $10.1 million in cash. However, as part of the final contract negotiations, SM agreed to give EYE SPY its old...
-
Question The tables below give a few values of a function f. (a) (2 points) Complete the tables assuming that is: A linear function -1 0 1 2 6 18 X f(x) 3 (b) If f is a linear function, what is the...
-
What are key determinants that can lead to the growth of close, trusting relationships between leaders and their teams?
-
Create a user-defined function named fun_A which computes both the surface area and the volume of a cylinder with a given radius and height in MATLAB. Then, write down the MATLAB expression to call...
-
Machinery was purchased for $440000 on January 1, 2022. Freight charges amounted to $15000 and there was a cost of $40000 for building a foundation and installing the machinery. It is estimated that...
-
In the context of business negotiation, what communication techniques are most effective for achieving favorable outcomes? Discuss the balance between assertiveness and collaboration, and the role of...
-
A foreign investor is interested in entering an economic sector of the Dominican Republic, for this he selected 5 sectors and thus evaluate their behavior. This was based on data from the Central...
-
Following is the unadjusted trial balance of Muller Traders: Cash in Hand Sales Return Carriage Outwards Stationeries Expense Import Duties Management Consultation Expense Withdrawals Unadjusted...
-
Digital Fruit is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt and to use...
-
How can a firm control the risk of changing exchange rates when billing an overseas customer?
-
Describe what is meant by ethical behavior.
-
Use a financial calculator or computer software program to answer the following questions: a. What is the present value (PV) of $359,000 that is to be received at the end of 23 years if the discount...
-
What are the main components of corporate directional strategies?
-
Define concept growth. What does this mean to entrepreneurial firms?
-
Discuss the significance of discounting in business decision making.
Study smarter with the SolutionInn App