Krispy Kreme Doughnuts (KKD) has a capital structure consisting almost entirely of equity. a. If the beta
Question:
Krispy Kreme Doughnuts (KKD) has a capital structure consisting almost entirely of equity.
a. If the beta of KKD stock equals 1.6, the risk-free rate equals 6 percent, and the expected return on the market portfolio equals 11 percent, what is KKD’s cost of equity?
b. Suppose that a 1 percent increase in expected inflation causes a 1 percent increase in the risk-free rate. Holding all other factors constant, what will this do to the firm’s cost of equity? Is it reasonable to hold all other factors constant? What other part of the calculation of the cost of equity is likely to change if expected inflation rises?
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
a Krispy Kremes cost of equity is 6 1611 6 14 b If ...View the full answer
Answered By
Asim farooq
I have done MS finance and expertise in the field of Accounting, finance, cost accounting, security analysis and portfolio management and management, MS office is at my fingertips, I want my client to take advantage of my practical knowledge. I have been mentoring my client on a freelancer website from last two years, Currently I am working in Telecom company as a financial analyst and before that working as an accountant with Pepsi for one year. I also join a nonprofit organization as a finance assistant to my job duties are making payment to client after tax calculation, I have started my professional career from teaching I was teaching to a master's level student for two years in the evening.
My Expert Service
Financial accounting, Financial management, Cost accounting, Human resource management, Business communication and report writing. Financial accounting : • Journal entries • Financial statements including balance sheet, Profit & Loss account, Cash flow statement • Adjustment entries • Ratio analysis • Accounting concepts • Single entry accounting • Double entry accounting • Bills of exchange • Bank reconciliation statements Cost accounting : • Budgeting • Job order costing • Process costing • Cost of goods sold Financial management : • Capital budgeting • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback period • Discounted cash flows • Financial analysis • Capital assets pricing model • Simple interest, Compound interest & annuities
65+ Reviews
86+ Question Solved
Related Book For 
Introduction to Corporate Finance
ISBN: 978-0324657937
2nd edition
Authors: Scott B. Smart, William L Megginson
Question Posted:
