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Junior analyst to make valuation of adidas

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Question1. Fast Food co has an equity beta of 0.8, and leverage of 0.4. The company has a corporate tax rate of 35%. The company is thinking of launching a new subsidiary where the leverage will increase to 0.7, what is be the beta of the NEW company taking into account this different leverage.

Question2.

We have been hired as a junior analyst to make valuation of ADIDAS. We are going to be analyzing. Your boss wants you to calculate the WACC.

You have the following information to calculate the WACC:

The current price of the company is 169 € and total number of shares outstanding is 209 million. The consensus target price of Adidas is 173 €.

The company has issued bonds that have a book value of 1.500 Million € in the balance sheet and a market value of 2.300 Million €. Bonds that are comparable are offering a YTM of 2.25%. The company tax rate is 30%.

Adidas is quoted in the German market where the risk free rate is 1.5% and the market Risk Premium is 5.08%. The company has a beta 0.81.

Reference no: EM132530836

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