Question on capital asset pricing model

Assignment Help Finance Basics
Reference no: EM133057427

Fargo Cabinets is a small company and it isn't publicly traded, but Cathy wants to make sure that she understands the appropriate cost of equity. To analyze the risk of Fargo Cabinet's three divisions, she found 5 publicly traded companies in cabinets, commercial construction, home construction and do-it-yourself retail stores and the average beta was 1.20. She feels the average of these firms properly reflects her firm's blended business risk and the overall systematic risk given her capital structure. The expected return on the market regardless of the economic scenario is projected at 8.7%. The risk-free rate is 2.4%.

What is the cost of equity using the Capital Asset Pricing Model?

Reference no: EM133057427

Questions Cloud

Required return on equity investments : A stock just paid a dividend of $1.50 per share. The board of directors simultaneously announces its intentions to increase all future annual dividends by a con
Calculating flotation costs southern alliance company : Calculating Flotation Costs Southern Alliance Company needs to raise $55 million to start a new project and will raise the money by selling new bonds.
Compute the inventory turnover for each year : Question - The following data were taken from the income statements of Oriole Company. Compute the inventory turnover for each year
Find out the adjusted for inflation : The bond was issued 3 years ago with an IRR of 5%, the date on which you decided to buy it. The NPV is USD 1,000,000.
Question on capital asset pricing model : What is the cost of equity using the Capital Asset Pricing Model?
Calculate the interest expense for each of the three years : The bonds have a life of three years, a face value of $10 00 each, Calculate the interest expense for each of the three years
Calculate the bond equivalent yield for the t-bill : Calculate the bond equivalent yield for the following T-bill:
Calculate the amount of cash flow from investing activities : The Company purchased $30,000 bonds from the market. Calculate the amount of cash flow from investing activities
How large can your mortgage loan be : After doing some budgeting, you've decided that the largest monthly mortgage payment you would be comfortable with is $1,450. If the bank is charging 6% annual

Reviews

Write a Review

Finance Basics Questions & Answers

  Explain when and if you should get the following types of

explain when and if you should get the following types of insurancea.life insurance when and how much?b.auto

  Capital market securities only include equity

Capital market securities only include equity.

  What is the wacc prior to the expansion

What is the WACC prior to the expansion? After the expansion? Why would leverage cause the increase in the cost of debt.

  What should be the repurchase? price

The Dunn Corporation is planning to pay dividends of ?$540,000. There are 270,000 shares? outstanding, and earnings per share are ?$4

  What is your net interest savings over the life of the loan

What is your net interest savings over the life of the loan, assuming the loan is held to its maturity?

  Should the robinson corporation refund the old issue

The Robinson Corporation has $50 million of bonds outstanding that were issued at a coupon rate of 11¾ percent seven years ago.

  The ceo of your firm is eeking advice concerning the

the ceo of your firm is eeking advice concerning the capital structure for a proposed new project. advise the ceo as to

  Pay out a liquidating dividend

At the end of the four years, the company will also pay out a liquidating dividend. If the discount rate is 12 percent, and the current share price is $75.

  What is the expected rate of return on the project

Consider the following probability distribution of returns estimated for a proposed project that involves a new ultrasound machine.

  What was the exchange rate

Suppose the exchane ratee between the US dollar and Swedish krona was 6.3 krona = $1, and the exchange rate between the dollar and the British pound was E1 = $1.64. What was the exchange rate between Swedish kronas and pounds?

  What would you be willing to pay for receiving a payment

If the discount rate is 8.9%, what would you be willing to pay for receiving a payment of $600 every year forever?

  How much did jack originally pay for the share

How much did Jack originally pay for the share? (in dollars to the nearest cent; don't use $ sign)

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd