Corporate Finance
80 Corporate Finance Set the level of investment in Stock 1 at Re 1 and solve for the rest. INV 1 = Re 1 INV 2 = Re 0.624857 I ...
Risk and Return 81 Their model also captures firm specific default risk. They use bond ratings, Altman’s Z score and duration ...
82 Corporate Finance where a = intercept from the regression, and b = slope = beta of the stock. The intercept of the regressi ...
Risk and Return 83 REFERENCES AND SUGGESTED READING Altman, Edward (1968). ‘Financial Ratios, Discriminant Analysis and the Pr ...
84 Corporate Finance EXERCISE Refer to the following data: ACC Indian Hotels Mean weekly returns 0.52 0.08 Standard deviatio ...
Risk and Return 85 The following data is available for three stocks: Stock Variance Covariance (i, m) Correlation (i, m) 1 1 ...
86 Corporate Finance Chapter 4 Estimation of Cost of Capital OBJECTIVES Be able to apply CAPM, DCF, Risk Premium, and Fama-F ...
Estimation of Cost of Capital 87 retailers have started sourcing their requirement of towels from India, and the major share g ...
88 Corporate Finance Academic studies in the US and Canada have shown that the long-term bonds are not completely riskless. Th ...
Estimation of Cost of Capital 89 Holding period return for the stock = 1– ( – 1– ) Div t tt P PP + where Pt and Pt–1 are curre ...
90 Corporate Finance Exhibit 4.2 Beta estimates for different return intervals Company Weekly Monthly Quarterly Ashok Leyland ...
Estimation of Cost of Capital 91 Some theorists argue that arithmetic mean is consistent with the mean—variance framework of C ...
92 Corporate Finance The CAPM parameters can be estimated individually, as demonstrated in the preceding sections, and then pl ...
Estimation of Cost of Capital 93 OTHER APPROACHES FOR ESTIMATION OF COST OF EQUITY There are two other popular methods for cal ...
94 Corporate Finance With a forecast of D 1 , D 2 , D 3 , D 4 , and g, the cost of equity can be found by trial and error. Els ...
Estimation of Cost of Capital 95 Under the ex-ante (expected) risk premium method, the average expected future return on a gro ...
96 Corporate Finance Going by the above reasoning, we should not take the interest rate on non-traded debt like term loans as ...
Estimation of Cost of Capital 97 The Weighted Average Cost of Capital (WACC) The weighted average cost of capital is the weigh ...
98 Corporate Finance In 2002, Welspun had the following capital structure: March 31, 2002 (Rs lac) Equity capital 15,778.43 Pr ...
Estimation of Cost of Capital 99 Johnson & Johnson has 198 operating companies in 54 countries around the world employing ...
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