Information regarding Kroger Company, and four industry competitors is shown below, on December 12, 2007. Company Equity
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Information regarding Kroger Company, and four industry competitors is shown below, on December 12, 2007. | |||||
Company | Equity beta | Interest-Bearing Debt | Market value equity | ||
Kroger Company | 1.05 | $ 6,674.0 | $ 17,690.8 | ||
Safeway Inc. | 0.49 | 5,897.9 | 15,236.3 | ||
Supervalu Inc. | 1.17 | 8,936.0 | 8,054.3 | ||
Whole Foods Markets | 1.16 | 760.9 | 5,762.1 | ||
Winn Dixie Stores Inc. | 2.56 | 160.1 | 916.8 | . | |
a. | Estimate the industry asset beta, weighting each company by its proportion of total market value of equity. | ||||
b. | Relever the industry asset beta to reflect Kroger's capital structure, and to make another (industry-informed) estimate of Kroger's equity beta. |
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...
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