Blast Corp. is an all-equity firm. The company is expected to have constant earnings of $3.75 per
Question:
Blast Corp. is an all-equity firm. The company is expected to have constant earnings of $3.75 per share per annum for the foreseeable future (in perpetuity). If Blast's cost of equity is 8%, and there are currently 7 million shares outstanding,
Calculate the value per share.
Calculate the estimated market value of the firm's equity.
2. Using the CAPM, calculate the cost of equity (ke) for Bono Corp. where the Bank of Canada 1 year yield for T-Bills is estimate for the risk-free rate (RF), Bono Corp's beta is equal to 1.43, and an expected market return (ERm) of 9%?
1. Research the risk free rate:
Go to: http://www.bankofcanada.ca/rates/interest-rates/t-bill-yields/ (Links to an external site.)
Part 1:
Select the Rate from Treasury bill average yields - 1 year 2020-03-03
Part 2:
Calculate Bono Corp's Cost of Equity using the CAPM to 4 decimal places.
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow