URGENT!!

NO EXCEL !

NO HANDWRITING!

Consider the following information available for the firm F

The long term historical average return on European government bonds is 4.5%

The systematic risk of equity & is 1.20

The risk premium expected for the market is 6%

The pre-tax cost of debt 2%

The tax rate 24%

The debt represents 10% of total capital.

1. Provide and estimation of the cost of equity using the CAPM model re? 4 marks

2. Explain why the CAPM model may be incomplete to estimate the cost of capital? 3 marks

3. Compute the WACC? 4 marks

4. Given its equity beta of 0.8 and its debt beta of 0.2, what is the asset beta of the firm F? 4 marks

Question 19 Consider the following information available for the firm F The long term historical average return on European government bonds is 4.5% The systematic risk of equity 3 is 1.20 The risk premium expected for the market is 6% The pre-tax cost of debt 2% The tax rate 24% The debt represents 10% of total capital. 1. Provide and estimation of the cost of equity using the CAPM model re? 4 marks 2. Explain why the CAPM model may be incomplete to estimate the cost of capital? 3 marks 3. Compute the WACC? 4 marks 4. Given its equity beta of 0.8 and its debt beta of 0.2, what is the asset beta of the firm F? 4 marks For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac)