Nestle of Switzerland is revisiting its cost of equity analysis in 2014. As a result of extraordinary

Question:

Nestle of Switzerland is revisiting its cost of equity analysis in 2014. As a result of extraordinary actions by the Swiss Central Bank, the Swiss bond index yield (10-year maturity) has dropped to a record low of 0.520%. The Swiss equity markets have been averaging 8.400% returns, while the Financial Times global equity market returns, indexed back to Swiss francs, is at 8.820%. Nestle's corporate treasury staff has estimated the company's domestic beta at 0.825, but its global beta (against the larger global equity market portfolio) at .515.

a. What is Nestle's cost of equity based on the domestic portfolio of a Swiss investor?

b. What is Nestle's cost of equity based on a global portfolio for a Swiss investor?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...