Define difference between the highest and lowest estimates

Assignment Help Financial Econometrics
Reference no: EM13335588

The CFO of Lenox Industries hired you as a consultant to help estimate its cost of capital. You have obtained the following data:

(1) rd = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%.

(2) rRF = 5.00%, RPM = 6.00%, and b = 1.25. (3) D1 = $1.20, P0 = $35.00, and g = 8.00% (constant).

You were asked to estimate the cost of equity based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference?

Reference no: EM13335588

Questions Cloud

Explain the two electrodes are connected by a copper wire : Consider a chromium-silver voltaic cell that is constructed such that one half-cell consists of the chromium, Cr, electrode immersed in a Cr(NO3)3 solution, and the other half-cell consists of the silver, Ag, electrode immersed in a AgNO3 solution..
What will decide to do concerning the currency exposures : Assume that this high correlation is expected to continue. Your forecasting staff has indicated that the Swiss franc may exhibit minor appreciation over the next few months, but depreciation is unlikely.
Identify the virus software running on your computer : Identify the Virus Software running on your computer. Is your Virus Software current and up-to-date. Have you downloaded the latest virus definitions? If not, do so and note which ones you downloaded. Run a virus scan on your computer and note you..
Explain during a acid catalyzed dehydration of 2-octanol : During a acid catalyzed dehydration of 2-octanol. Why is trans-2-octene the major product instead of cis-2-octene
Define difference between the highest and lowest estimates : You were asked to estimate the cost of equity based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference
Explain naphthol with diethyl ether, 2-chloro-benzoic acid : Naphthol with diethyl ether, 2-chloro-benzoic acid and then aqueous sodium bicarbonate? Will any substance not do anything
Explain what is the ph after 0.00514 mol of hcl : A buffer that contains 0.511 M of a base, B and 0.897 M of its conjugate acid BH+, has a pH of 9.79. What is the pH after 0.00514 mol of HCl are added to 0.593 L of the solution
Explain which species exhibit hydrogen bonding : Which species exhibit hydrogen bonding. I. H3C - O - CH3 II. CH3 - CH2 - OH III. CH3 - CH2 - NH2
Determine what is the modified duration of the asset : An Asset will provide cash inflows of $8,000 in 4 years and $20,000 in 10 years. The assert is currently priced at 5% annual effective. a. What is the modified duration of the asset

Reviews

Write a Review

Financial Econometrics Questions & Answers

  What is the value of the current assets of the company

Saunders Corp. has a book net worth of $13,405. Long-term debt is $8,600. Net working capital, other than cash, is $3,235. Fixed assets are $17,780 and current liabilities are $1,790.

  What is the market price of a 1000dollar face value bond

Wine and Roses, Inc. offers a 8 percent coupon bond with semiannual payments and a yield to maturity of 8.73 percent. The bonds mature in 8 years. What is the market price of a $1,000 face value bond

  Explain how to compute the cost of external equity-re

The expected dividend is $2.50 per share and the growth in dividends is 8%. If the flotation cost is 10% of the issue proceeds, compute the cost of external equity, re.

  How much additional equity financing is required for a year

XYZ Company is currently operating at full capacity, has sales of $29,000, current assets of $1,600, current liabilities of $1,350, net fixed assets of $27,500, and 5 percent profit margin.

  Determine what is length of kanwais cash conversion cycle

Kanwai fans produces 25,000 fans per day at a cost of $7.50 each (material and labor). It takes the firm 12 days to convert raw materials into a fan and sell ir

  What is richards total profit or loss on the three ipos

The next three IPOs are each priced at $30 a share and will all start trading on the same day. Richard is allocated 1,000 shares of IPO A, 400 shares of IPO B, and 100 shares of IPO C.

  Find wacc of a company for long term debt

a company has 60% equity(common stock),30% longterm debt and 10% shortterm liabilities. The cost of equity(common stock) is 8%,while longterm debt is 6% respectively.

  By how much would aerelons shares be expected to fall

If Aerelon has 65 million shares outstanding, an equity cost of capital of 12%, and no debt, by how much would Aerelon's shares be expected to fall in price as a result of this accident

  How much would be willing to lend the business owner

A small business owner visits his bank to ask for a loan. The owner states that she can repay a loan at $1,250 per month for the next 3 years and then $500 per month for two years after that.

  How large must the annual deposits be to create fund

To supplement your planned retirement in exactly 39 years, you estimate that you need to accumulate $380,000 by the end of 39 years from today. You plan to make equal, annual, end-of-year deposits into an account paying 6% annual interest.

  What is the current share price at a rate of 20 percent

Dividends are expected to grow at a rate of 20 percent for the next three years, with the growth rate falling off to a constant 8 percent thereafter. If the required return is 11 percent and the company just paid a dividend of $1.45

  Locate articles on accounting for multinational operations

Locate two recent articles on accounting for multinational operations. You can use one that focuses on IFRS requirements and one that focuses on GAAP. Or you can use two articles that compare the two sets of requirements.

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