Question: Multinational Business Finance Fourteenth Edition David K. Eiteman Chapter 13 4. Nestl of Switzerland Revisited. Nestl of Switzerland is revisiting its cost of equity analysis

Multinational Business Finance Fourteenth Edition David K. Eiteman

Chapter 13

4. Nestl of Switzerland Revisited. Nestl of Switzerland is revisiting its cost of equity analysis in 2014.As a result of extraordinary actions by the Swiss Central Bank, the Swiss bond index yield (10-year maturity) has dropped to a record low of 0.520%. The Swiss equity mar- kets have been averaging 8.400% returns, while the Financial Times global equity market returns, indexed back to Swiss francs, is at 8.820%. Nestls corporate treasury staff has estimated the companys domestic beta at 0.825, but its global beta (against the larger global equity market portfolio) at .515. a. WhatisNestlscostofequitybasedonthedomes- tic portfolio of a Swiss investor? b. What is Nestls cost of equity based on a global portfolio for a Swiss investor?

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