Question: I really need help please You need to estimate the equity cost of capital for XYZ Corp. You have the following data available regarding past
I really need help please
You need to estimate the equity cost of capital for XYZ Corp. You have the following data available regarding past returns: a. What was XYZ's average historical return? b. Compute the market's and XYZ's excess returns for each year. Estimate XYZ's beta. c. Estimate XYZ's historical alpha. d. Suppose the current risk-free rate is 3%, and you expect the market's return to be 6%. Use the CAPM to estimate an expected return for XYZ Corp.'s stock. e. Would you base your estimate of XYZ's equity cost of capital on your answer in part (a) or in part (d)? XYZ's excess return for 2012 was - 42 %. (Round to the nearest integer.) Data Table Estimate XYZ's beta. XYZ's beta is . (Round to two decimal places.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) c. Estimate XYZ's historical alpha. XYZ Return XYZ's historical alpha was %. (Round to one decimal place.) Year 2011 2012 Risk-free Return 4% 1% Market Return 6% - 44% 10% - 41% d. Suppose the current risk-free rate is 3%, and you expect the market's return to be 6% Click to select your answer(s). Print Done Save for Later
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
