Cost of equity based on domestic portfolio of swiss investor

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Reference no: EM132028588

Nestle of Switzerland Revisited. Nestle of Switzerland is revisiting its cost of equity analysis. As a result of extraordinary actions by the Swiss Central Bank, the Swiss bond index yield (10-year maturity) has dropped to a record low of 0.520%. The Swiss equity markets have been averaging 8.400% returns, while the Financial Times global equity market returns, indexed back to Swiss francs, is at 8.820%. Nestle’s corporate treasury staff has estimated the company’s domestic beta at 0.825, but its global beta (against the larger global equity market portfolio) at .515. (Use Nestle’s domestic beta at 1.10 and its global beta at 0.90) to calculate cost of equity on the domestic portfolio as well as on global portfolio

a. What is Nestle’s cost of equity based on the domestic portfolio of a Swiss investor?

b. What is Nestle’s cost of equity based on a global portfolio for a Swiss investor?

Reference no: EM132028588

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