Niklas is asked to estimate the cost of equity capital for Ariston holdings, a listed firm in
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Question:
1. The risk-free rate is the ten-year Zimbabwean Government bond rate.
2. The market risk premium is the ten-year historical difference between the average returns on ZSE All Share Index, a market index consisting of 63 listed firms in Zimbabwe, and the ten-year Zimbabwean Government bond rate.
3. The beta for Ariston is the average beta of other global firms that sell similar agricultural products.
Requirements:
a. What are the potential errors in Niklas' estimation of Ariston's cost of equity capital?
b. What advice would you give Niklas to fix these errors?
Related Book For
Entrepreneurial Finance
ISBN: 978-1305968356
6th edition
Authors: J. Chris Leach, Ronald W. Melicher
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