Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Cost of Equity Since XYZ is currently private and has no stock price information, we can use the cost of equity of Dropbox as an
Cost of Equity
- Since XYZ is currently private and has no stock price information, we can use the cost of equity of Dropbox as an estimate. Use the daily stock prices from Jan 1st 2019 to Dec 31st 2019 to calculate daily returns for Dropbox (ticker DBX). You can find historical stock prices on Yahoo Finance.
- Use the prices for S&P500 (ticker: SPY) to calculate the market return in the same sample period. Use 2% APR as annual risk-free rate.
- Use CAPM to estimate beta.
- Estimate cost of equity for Dropbox assuming 5% annual expected market return.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Economic Indicator Handbook How To Evaluate Economic Trends To Maximize Profits And Minimize Losses
Authors: Richard Yamarone
1st Edition
1118204662, 9781118204665
