Estimate the companys beta and required return on equity

Assignment Help Corporate Finance
Reference no: EM13328271

1. Select a company from the list of S & P 500 stock index. Use the company's Annual report to estimate Market value of Debt (Long term Debt). Estimate the company's beta and required return on equity using the CAPM. Finally estimate the firm overall cost of capital.

Estimating market value of debt is next to impossible as most debts are not actively traded in the market. Furthermore, you know that some bonds are likely to get downgraded, others default, and recovery rate is fairly uncertain. Estimating market value of a firm's debt is very difficult if not impossible. As you know in estimating WACC, one needs to have market value as opposed to book vlaue. To remedy the above problem for estimating market value of debt use book value of short term debt one year and higher and then add 1/2 of book value of long term debt to arrive at market value of debt. This is used by KMV to calculate likelihood of default for publicly listed company. I would like to use Disney if possible.

Verified Expert

Reference no: EM13328271

Questions Cloud

Determine what is the return on stockholders equity : Fondren Machine Tools has total assets of $3,850,000 and current assets of $856,000. It turns over its fixed assets 1.9 times per year. Its return on sales is 6.7 percent. It has $1,890,000 of debt.
Explain what is the wavelength of the radiation : A microwave oven operates at 2.00GHz . What is the wavelength of the radiation produced by this appliance. Express the wavelength numerically in nanometers.
Calculate the projects payback assuming steady cash flows : The Walker Landscaping Company can purchase a piece of equipment for $3,600. The asset has a two-year life, and will produce a cash flow of $600 in the first year and $4,200 in the second year.
What is the horizontal range of the projectils : A Projectile is fired with an initial velocity of 60 m/s at an angle of 379 to the horizontal. Assuming there is no friction, what is the horizontal range of the projectils
Estimate the companys beta and required return on equity : Estimate the company's beta and required return on equity using the CAPM. Finally estimate the firm overall cost of capital - This is used by KMV to calculate likelihood of default for publicly listed company. I would like to use Disney if possible.
Find what are the number of copies sold in three years : Your finance text book sold 47,000 copies in its first year. The publishing company expects the sales to grow at a rate of 19.0 percent for the next three years, and by 6.0 percent in the fourth year.
The structure of a compound that when undergoes elimination : Structure of a compound that when undergoes elimination will produce a product containing conjugation
What is the correct amount of lease expense for 2014 : on January 1, 2013 Gibson corporation entered into a four-year operating lease. The payments were as follows. $21000 in 2012, $19000 in 2013, 16,000 in 2014, 14000 in 2015.
How fast is it moving when it reaches the ground : A suitcase falls out of an airplane which is 400 meters above the ground. How fast is it moving when it reaches the ground

Reviews

Write a Review

 

Corporate Finance Questions & Answers

  Importance of maturity matching

Give some example that underscores importance of maturity matching and its importance to sound financial money management and also explain its merits.

  Determine the present value of stock

Joe's Ski Shop Incorporated has maintained a dividend rate of $4/share for many years. The same rate is expected to be paid in future years.

  Find the risk adjusted return

Manager A shows a return of 20 percent with a standard deviation of 17 percent. Manager B shows a return of 13% with a standard deviation of 6 percent.

  Multiple choice questions on finance

The KPMM Accounting company buy 10 laser toner cartridges for 60 dollar each for a total of 600 dollar on June 1 and recorded buy as an asset.

  Prepare a statement of affairs

The bank overdraft is secured by deposit of title deeds of leasehold properties. Preferential creditors are $6,000. Telephone rent outstanding is $480.

  Accounting for issuance and forfeiture of shares

Provide the accounting journal entries with explanations necessary to account for the above business transactions and events.

  Conduct a scenario and sensitivity analysis of the project

Explain how you would conduct a scenario and sensitivity analysis of the project. What would be some project-specific risks and market risks related to this project?

  Depreciate the new safety-croc model

Assume that you are in a 30% tax bracket. Calculate the NPV - depreciate the new "Safety-Croc" model straight line for 3 years to a salvage value of zero and your required rate of return is 15%, should you replace your crocodile

  Completion of the efficacy testing

Suppose you own stock in the Lewis-Striden Drug Corporation. Assume you had expected following events to occur last month: and the government would declare that real GNP had increase 1.2% during the previous quarter.

  Questions based on balance sheet data

Multiple Choice questions based on balance sheet data and An accounting time period that is one year in length is called and One of the accounting concepts upon which adjustments for prepayments and accruals.

  The project npv if the initial outlay is $21 million

A project can generate unlevered cash flow of $3 million per year in perpetuity. Suppose the firm considering this project finances its operations with an equal mix of debt and equit

  Financial management decisions of other retailers

Why is Amazon's cash cycle so much shorter than that of competitor Barnes & Noble? How does this comparison affect financial management decisions of other retailers?

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