Telefonica, a spanish conglomerat, with 30% revenues in Spain, 20 % in Germany, 20% in Brazil,...

  

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Telefonica, a spanish conglomerat, with 30% revenues in Spain, 20 % in Germany, 20% in Brazil, 15% Mexico and United States respectively is considering undergoing a merger with Amrica Mvil, the largest telecommunication firm in Mexico. For this reason the Telefonica Spain wants to assess its value in Mexican Peso. For the valuation you will need to find the Cost of Equity in Peso. It should be noted that the firm changed its capital structure by replacing debt with equity in 2020. Use the Beta exposure to CRP with weights based on revenues to find Cost of Equity. Assume a risk free rate of 7% for Mexican Peso. Telefonica, a spanish conglomerat, with 30% revenues in Spain, 20 % in Germany, 20% in Brazil, 15% Mexico and United States respectively is considering undergoing a merger with Amrica Mvil, the largest telecommunication firm in Mexico. For this reason the Telefonica Spain wants to assess its value in Mexican Peso. For the valuation you will need to find the Cost of Equity in Peso. It should be noted that the firm changed its capital structure by replacing debt with equity in 2020. Use the Beta exposure to CRP with weights based on revenues to find Cost of Equity. Assume a risk free rate of 7% for Mexican Peso.

Answer rating: 100% (QA)

To calculate the cost of equity in Mexican Pesos for Telefnica we will use the Capital Asset Pricing Model CAPM which is Cost of Equity E Riskfree Rat... View the full answer