You have come to work at Brna banka and have 2 companies under consideration, on the one hand Stl og Hnfur ehf and on the other hand Haus og Hali ehf. Stl og Nnfur has an expected return on the company of 11%. You benefit from a three-factor model. You believe that the following factors have a statistically significant effect on returns, ie. the market return itself, changes in GDP and returns on the oil market. You believe that the market return will grow by 5% (will be 5%), GDP will grow by 1% and oil prices will rise by 3%. Stl og Hnfur has a market beta of 0.6, a beta to GDP of 0.5 and an oil beta of 0.3. As mentioned above, the company's expected return is 11%. Of this 11%, what is the market rate of return? Haus and Hali have the following information given about the company. The company's income tax is 35%. Liabilities: 100,000 outstanding bonds each with a nominal value of ISK 1,700. The bonds are interest-free bubble loans (i.e. no interest payments and one installment) with a maturity date of 13 years and are sold on the market for ISK 432. Equity: 130,000 outstanding shares, market price per share is ISK 70. and equity beta is 1.35 The market: The market's risk premium is 6.5% and the risk-free rate is 6.85%. Find the weighted cost of capital Heads and Tails 

Answer rating: 100% (QA)

Brna Banka Investment Analysis Part 1 Stl og Hnfur ehf We cant directly isolate the market rate of return from the expected return using the given inf... View the full answer