Estimate Pepsi current beta

Assignment Help Financial Accounting
Reference no: EM132806083

Question - You have run a regression of monthly returns on PepsiCo against returns on the S&P 500 over the last 5 years and arrived at the following result:

ReturnPepsiCo = 0.23% + 1.20 × ReturnS&P 500

You are given the following additional information:

The current market value of equity at Pepsi is $40 billion and the firm has $10 billion in debt outstanding.

During the last 5 years, Pepsi had an average market value debt to equity ratio of 10%. The firm's marginal tax rate is 40%.

(a) Estimate Pepsi's current beta.

(b) Now assume that Pepsi will be spinning off its bottling operations for $10 billion, borrowing an additional $2 billion and buying back $12 billion worth of stock. The unlevered beta of firms operating in the bottling sector is 1.35. Estimate Pepsi's new beta.

Reference no: EM132806083

Questions Cloud

Analyze the role of performance rewards and recognition : Analyze the role of performance rewards and recognition in motivating employees, and their relationship to the performance management system.
Prepare the journal entries : October 7 - Sold merchandise on credit to Lacson Retailers, terms n/30, FOB shipping point, P 30,000. Prepare the journal entries
Pros and cons of top-down and bottom-up budgeting : In your own words explain the pros and cons of Top-Down and Bottom-Up budgeting. which one would you prefer for your business and why
Analyze both employees skill levels identified in scenario : Prepare a needs assessment to analyze both employees' skill levels identified in the scenario. Based on the needs assessment, prepare an analysis of what.
Estimate Pepsi current beta : During the last 5 years, Pepsi had an average market value debt to equity ratio of 10%. Estimate Pepsi current beta
Calculate firm weighted average cost of capital : Calculate the firm's Weighted Average Cost of Capital. Identify and analyze the relevant cash flows for the two alternatives.
Analyze an organizations approach to managing performance : This writing assignment requires you to analyze an organization's approach to managing performance. It can be your own organization or if you prefer you may.
Calculate late filing penalty for missing filing deadline : Calculate the late filing penalty for missing the filing deadline and explain any possible additional costs to the employer related to this oversight
Discuss how organizations have faced challenges : Discuss how organizations have faced the challenges that incident handlers are challenged with in identifying incidents when resources have been moved

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

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