Question
on the S&P500 and the equation was as follows: ReturnsGoogle = 0.0001 + 0.55 (ReturnsS&P500) R2 = 0.45, the standard error for beta estimate is
on the S&P500 and the equation was as follows:
ReturnsGoogle = 0.0001 + 0.55 (ReturnsS&P500) R2 = 0.45, the standard error for beta estimate is 0.5
You also note that the average unlevered beta for comparable firms is 1.4, Google's debt-to-equity ratio 30% ,T-bond rate is 0.075 and the equity risk premium is 0.065 and Google AA rate bond default spread is 0.01. ( Tax rate = 40%)
Please write your answers in decimals.
What is the levered beta for Google?
Answer for part 1 What is Google's after tax cost of debt?
Answer for part 2 What is Google's cost of equity?
Answer for part 3 What is the WACC?
Answer for part 4 What is the firm specific risk?
Answer for part 5 What is the market risk?
Answer for part 6 What is the lower bound in a 95 confidence interval for beta estimate?
Answer for part 7 What is the upper bound in a 95 confidence interval for beta estimate?
Answer for part 8
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