You are calculating an equity required rate of return for Hewitt & Co, Inc. (NYSE: HP) using
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- You are calculating an equity required rate of return for Hewitt & Co, Inc. (NYSE: HP) using the CAPM. Rather than relying on the published beta for HP or calculating one yourself, you are going to base your required rate of return on the betas of two comparable companies: Halliburton Company (NYSE: HAL) and Precision Drilling Corporation (TSX: PD). The current yield on a 30-year T-Bond is 1.57 percent and the current implied market equity risk premium is 5.25%. Given the information below, calculate the required return on HP equity using the average unlevered beta for the comparable firms, re-levered to reflect HP’s capital structure.
Company | Published Beta | Market Cap | Debt | Tax Rate |
PD | 2.62 | 1,520.2 | 1,152.3 | 0.35 |
HAL | 1.71 | 19,120.5 | 11,503.0 | 0.21 |
HP | 4,774.3 | 531.5 | 0.21 |
Related Book For
Personal Finance Turning Money into Wealth
ISBN: 978-0133856439
7th edition
Authors: Arthur J. Keown
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