Exercise 2 (Exam Spring 2020) Entertain You Inc, is an American company that operates in two businesses, Entertainment and Cable TV. The company gets approximately 30% of its revenues from the latter. In this industry, the average beta value is 1,11 and the average debs to equity ratio is 60,17%. The average bets value in the entertainment business is 1,33 with an average debs to equity ratio of 20.07% EntertainYou Inc, has 500000 shares outstanding, trading at 22,10 dollans. It has 4513 000 dollars in debt (market value). The US treasury bond rate is 2\%. Entertain You Ine. has an coperating income of 540000 and 80000 in interest expenses. Use a tax rate of 34% in all casex. At the moment, the S\&P 500 is at 3400 , paying 5% in dividends. The expected long-terns growth in dividends is expected to be 1,8%. a) What is the firm's D.E-ratio? b) Estimate the implied equity risk premium in the market. e) Estimate the unlevered betas in the entertainment industry and the Cable TV indestry. d) Estimate EntertainYou lac.'s bottom-up beta. e) Estimate the firm's cost of equity. We have the following relationships between the interest coverage ratio, the bond rating and default spread: f) Estimate Entertain You Inc; s cost of debt. g) What is the firm's cost of capital? Exercise 2 (Exam Spring 2020) Entertain You Inc, is an American company that operates in two businesses, Entertainment and Cable TV. The company gets approximately 30% of its revenues from the latter. In this industry, the average beta value is 1,11 and the average debs to equity ratio is 60,17%. The average bets value in the entertainment business is 1,33 with an average debs to equity ratio of 20.07% EntertainYou Inc, has 500000 shares outstanding, trading at 22,10 dollans. It has 4513 000 dollars in debt (market value). The US treasury bond rate is 2\%. Entertain You Ine. has an coperating income of 540000 and 80000 in interest expenses. Use a tax rate of 34% in all casex. At the moment, the S\&P 500 is at 3400 , paying 5% in dividends. The expected long-terns growth in dividends is expected to be 1,8%. a) What is the firm's D.E-ratio? b) Estimate the implied equity risk premium in the market. e) Estimate the unlevered betas in the entertainment industry and the Cable TV indestry. d) Estimate EntertainYou lac.'s bottom-up beta. e) Estimate the firm's cost of equity. We have the following relationships between the interest coverage ratio, the bond rating and default spread: f) Estimate Entertain You Inc; s cost of debt. g) What is the firm's cost of capital