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Compute the risk premium and the required return for company

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Reference no: EM132735124

Company Zero is a non-listed private company with total equity of P10 million and debt of P4.5 million. The tax rate is 30%, risk-free rate is 6%.

  • Company One is a publicly listed company which is in the same industry, product line and risk profile as Company Zero. It has a beta of 1.5, equity of P15 million and total debt of P6 million. Tax rate is 35%. The expected return of on a market portfolio is 12% and the risk-free return is 8%.

Question 1: Compute the beta for Company Zero.

Question 2: Compute the risk premium and the required return for Company One market portfolio.

Reference no: EM132735124

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