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Please help me on this question. i appreciate it! Thank you so much! Problem 1 he following data represent total assets, book value, and market
Please help me on this question. i appreciate it! Thank you so much!
Problem 1 he following data represent total assets, book value, and market value of common shareholders' equity for Azure, Indigo, and Theta. Azure manufactures and computer chips. Theta operates a chain of general merchandise stores. In addition, t market betas for the three firms and analysts' consensus forecasts of net income for Year sells cosmetics. Indigo develops and manufactures these data include existing +1 Assume that the risk-free rate of return in the economy is 2.5 percent and the market risk premium is 5.5 percent. (dollar amounts in millions) Total Assets Common Equit Alpha Indigo Theta $109.524$44.106 Book Value Market Value Market Equity Beta 466 $13,712 $17.480 13,4 $34.600 1.09 0.73 0.27 5,750 12,956$2,384 Analysts' Consensus Forecasts of Net Income for Year +1 Required a. Using the CAPM, compute the required rate of return on equity capital for each firm. b. Project required income for Year +1 for each firm. c. Project residual income for Year +1 for each firm. d. What do the different amounts of residual income imply about each firm? Do the projected residual i amounts help explain the differences in market value of equity across these three firms? Explain. Page 6Step by Step Solution
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