Problem 13.13 – Using CAPM
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
Find what the expected return on the stock will be.
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Find what the expected return on the stock will be.
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Determine the value of the firm if the firm sells some debt while ignoring taxes, and then determine the value of the firm taking taxes into consideration.
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Find the beta of the stock with the given information.
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Given the company’s value, debt, and tax rate… find the debt-to-equity ratio both with and without taxes.
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Determine Caterpillar’s book debt-to-value ratio, market debt-to-value ratio, and two measures to find the cost of capital.
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Find the expected return on the market with the given information.
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Determine the relevant figure for the debt ratio and do you need to revise your measure of debt ratio up or down.
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Given the cost of capital, the debt-equity ratio, and the interest rate… find the company’s new cost of equity and WACC.
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Find the risk-free rate based on the given information.
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Given the expected EBIT, cost of equity, borrowing rate, tax rate, and debt, determine the current value of the firm and then recompute the firm value if the firm takes on additional debt equal to a proportion of its unlevered value.
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