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Urgentt 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
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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.
Provide and estimation of the cost of equity using the CAPM model re ? 4 marks
Explain why the CAPM model may be incomplete to estimate the cost of capital? 3 marks
Compute the WACC? 4 marks
Given its equity beta of 0.8 and its debt beta of 0.2, what is the asset beta of the firm F?
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Investing All In One For Dummies
Authors: Eric Tyson
2nd Edition
1119873037, 978-1119873037
