Project #49686 - FIN515

 

50.

 

Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Autodesk stock and 40% Costco stock, according to the CAPM?

 

 

 

Chapter 12 (page 431):

 

26.

 

Unida Systems has 40 million shares outstanding trading for $10 per share. In addition, Unida has $100 million in outstanding debt. Suppose Unida’s equity cost of capital is 15%, its debt cost of capital is 8%, and the corporate tax rate is 40%.

 

  • a. What is Unida’s unlevered cost of capital?

  • b. What is Unida’s after-tax debt cost of capital?

  • c. What is Unida’s weighted average cost of capital?

     

    27.

    You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. However, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be 6%. If its corporate tax rate is 40%, what is your estimate of its WACC?

     

 

Subject Mathematics
Due By (Pacific Time) 11/30/2014 10:58 pm
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