Reference no: EM13910020
1. You need to estimate the equity beta for Golden Clothiers, Inc. Golden's debt-to-equity ratio is 85%, which is higher than a typical firm in its industry. The following table shows the levered equity betas and debt-to-equity ratios for three comparable chemical firms. Assume the tax rate is 40%.
| Company |
Levered Beta |
D/E ratio |
| TJ Maxx |
1.68 |
0.25 |
| New York & Co. |
2.14 |
0.16 |
| Express, Inc. |
1.23 |
0.28 |
a. Assuming debt is risk-free, use the information given above to estimate the unlevered equity betas of each of these companies.
b. What is your estimate of Golden Clothiers' levered equity beta?
c. If T-Bills are yielding 1.8% and the return on the market is 9.3%, what is the required return on Golden Clothiers' stock, according to the CAPM?
d. Golden has 5-year maturity bonds outstanding with a par value of $1,000 that pay annual coupons of 5%. These bonds are currently selling for $982. What is Golden's required return on debt?
e. If Golden has no preferred stock outstanding, their debt-to-equity ratio of 85% is expected to remain constant going forward, and their marginal tax rate is 40%, what is their weighted average cost of capital?
|
Determine a confidence interval of population mean birth
: Determine a 95% confidence interval of population mean birth weight in the Country A. Interpret it. Determine a 95% confidence interval of difference of population mean birth weight in the Country A and mean birth weight in the Country B
|
|
What is abc enterprises'' weighted average cost of capital
: The company is paying 12 percent on borrowings from the bank and expects that rate to continue. The company can issue new long-term debt at 10.7 percent. Preferred stock has a required return of 11.5 percent. The stock is currently selling at $20 ..
|
|
Compute the tax savings of these two alternatives
: Eileen can claim a dependent care credit for these expenses. Eileen has no other income or deductions. Compute the tax savings of these two alternatives and make a recommendation to Eileen.
|
|
How do housing prices vary as we move away from the cbd
: How do housing prices vary as we move away from the CBD and Compare the cost of commuting for high-income and low-income households
|
|
What your estimate of golden clothiers levered equity beta
: If Golden has no preferred stock outstanding, their debt-to-equity ratio of 85% is expected to remain constant going forward, and their marginal tax rate is 40%, what is their weighted average cost of capital?
|
|
Calculate a t-based confidence interval for m
: Use the Excel output in Figure 8.15 to calculate a t-based 95 percent confidence interval for m, the mean of the breaking strengths of all possible new trash bags.
|
|
What is the ytm of the bond today
: A corporate bond has a face value of $1,000 and an annual coupon interest rate of 7 percent. Interest is paid annually. Of the original 20 years to mautrity, only 10 years of the life of the bond remain. The current market price of the bond is $872. ..
|
|
Find probability that at least 10 people will come to store
: A local drugstore owner knows that, on average, 20 people enter his store eachhour, assume that the number of people that come into the store follows a Poissonprocess. Find the probability that at least 10 people will come to the store in 30 minute..
|
|
Period of time some of the toluene
: An underground storage tank was used to store toluene. Over a period of time some of the toluene leaked from the tank, contaminating the soil and groundwater below the tank.
|