The Desert Outlet has an equity beta of 1.5, a debt beta of 0.1, and a cost

Fantastic news! We've Found the answer you've been seeking!

Question:

The Desert Outlet has an equity beta of 1.5, a debt beta of 0.1, and a cost of equity of 14.5 percent. The risk-free rate of return is 4.25 percent. The firm's debt-equity ratio is 0.2. What is the firm's asset cost of capital?

Related Book For answer-question

International Financial Management

ISBN: 978-0078034657

6th Edition

Authors: Cheol S. Eun, Bruce G.Resnick

See More Books

Posted Date: Dec 16, 2020 01:07 AM

See More Questions

Suppose there are three birds flying in the sky and assume the birds' speeds are v(k), v(k) and v3 (k) at moment k, respectively. Each bird will adjust its speed based on the average of the other two...
Suppose the risk free rate of return is 6%, maturity risk premium is 2%, inflation premium is 4%, the default risk on similar debt is 3%, and the liquidity premium is 2%. What is the nominal interest...
The risk- free rate of return is 8 percent, the expected rate of return on the market portfolio is 15 percent, and the stock of Xyrong Corporation has a beta coefficient of 1.2. Xyrong pays out 40...
Consider the approximation of the welfare loss due to inter-area deviations from the correct rate of care. All else equal, which procedures would yield the largest welfare losses those with low price...
Enter the beginning balances in the Study Guide with Working Papers. Post the following adjusting entries (be sure to cross-reference back to the journal) that came from the Adjustment columns of the...
What is the difference between object-oriented languages and UML?
Use a dot plot to display the data, which represent the blood glucose levels (in milligrams per deciliter) of 24 patients at a pathology laboratory. Organize the data using the indicated type of...
Here are the prices of three bonds with 10-year maturities: Bond Coupon (%) Price (%) 2 ............................ 81.62 4 ............................ 98.39 8 ........................... 133.42 If...
Explains your interest in the field of psychology and why developmental psychology is so important when working with drug and alcohol clients. , and what you ultimately hope to achieve in using...
1. What problems were Scotts Miracle Gro facing? 2. Which software was used to analyze data collected by Scotts? 3. How does a software tool such as Luminoso analyze data? 4. What are some strategic...
Co. plans to pay the following dividends: $10, $15, $7, $3. Afterwards, dividends are expected to grow at a constant rate of 5%. Required return is 13%. What is the current share price?
What is the refinancing rate? What happens to the money supply when the European Central Bank raises its refinancing rate?
What is the difference between the price level and inflation? Explain how an increase in the price level affects the real value of money.
If the central bank wants to increase the money supply with outright open market operations, what does it do?
List and explain the three reasons why the AD curve is downwards sloping.
How do banks make profit and what considerations must banks give to the trade-off between security and profit?
1. Why do you think people are so motivated to come up with attributions for behavior? 2. Can you think of a situation when you have committed the error of over attribution with someone? What...
Fred Farmer needs to prepare a balance sheet for his bank. He spent the day getting the following information. Fred needs your help to build a balance sheet and evaluate it. The information was...
Explain the arrangements and workings of the European Monetary System (EMS).
Describe the remeasurement and translation process under FASB 52 of a wholly owned affiliate that keeps its books in the local currency of the country in which it operates, which is different than...
Suppose now that Telmex has made its shares tradable internationally via cross listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. Discuss the possible effects...
Companies are facing a great amount of change in every facet of their operations today. To remain competitive, companies must keep abreast of current developments in several areas. You recently got...
For each of the situations listed, identify the primary standard from the IMA Statement of Ethical Professional Practice that is violated (competence, confidentiality, integrity, or credibility.)...
Sustainability involves more than just the impact of actions on the environment. The triple bottom line recognizes that a company has to measure its impact on its triple bottom line for its long-term...

The Desert Outlet has an equity beta of 1.5, a debt beta of 0.1, and a cost

Question:

Expert Answer:

DESERT OUTLET ANAL4515 DEquity beta of 15 Delt beta of Cost ... View the full answer

International Financial Management

Students also viewed these general management questions