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You are calculating an equity required rate of return for Hewitt & Co, Inc. (NYSE:HP) using the CAPM. Rather than relying on the published beta

  1. You are calculating an equity required rate of return for Hewitt & Co, Inc. (NYSE:HP) using the CAPM. Rather than relying on the published beta for HP or calculating one yourself, you are going to base your required rate of return on the betas of two comparable companies: Halliburton Company (NYSE:HAL) and Precision Drilling Corporation (TSX:PD). The current yield on a 30-year T-Bond is 1.57 percent and the current implied market equity risk premium is 5.25%. Given the information below, calculate the required return on HP equity using the average unlevered beta for the comparable firms, re-levered to reflect HPs capital structure. Show all your work!

Company

Published Beta

Market Cap

Debt

Tax Rate

PD

2.62

1,520.2

1,152.3

0.35

HAL

1.71

19,120.5

11,503.0

0.21

HP

4,774.3

531.5

0.21

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