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1 Question 1 ( 2 7 points ) 2 . Kathrine estimated the stock beta for TASTA, a new EV company, using the past 6
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Kathrine estimated the stock beta for TASTA, a new EV company, using the past months of data,
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The current riskfree interest rate is and the market returns Rm is Kathrine convinced the local financial firms to raise longterm debt for TASTA at the premium of over the riskfree rate. Currently, TASTA pays for corporate taxes.
points If CAPM works, then what should be value of the intercept in equation points Can you test your prediction above?
points According to CAPM, what is your estimate for the equity cost of capital?
points What is cost of debt for TASTA?
points For the last months, TASTA did not have any outstanding debt. What is the cost of capital for TASTA?
points If the ratio debt over assets target is what is the new weighted average cost of capital for TASTA?
points If Kathrine runs a similar regression two years from now, and she does not expect major changes in terms of systematic risk, except that the company will have more debt, can we still use the value of beta presented in equation Explain!
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