1. The total market value of the equity of Living Inc. is $6 million, and the total value of its debt is $4 million. The
Posted: Fri Jul 01, 2022 7:43 am
1. The total market value of the equity of Living Inc. is $6million, and the total value of its debt is $4 million. Thetreasurer estimates that the beta of the stock currently is 1.2 andthe expected risk premium on the market is 10%. The treasury billrate is 4%, and investors believe that the Living's debt isessentially free of default risk.
a. What is the required rate of return on Living stock?
b. Estimate the WACC assuming a tax rate of 21%.
c. Estimate the discount rate for an expansion of the company'spresent business.
*ANSWER MUST BE IN 2 DECIMAL.
a. What is the required rate of return on Living stock?
b. Estimate the WACC assuming a tax rate of 21%.
c. Estimate the discount rate for an expansion of the company'spresent business.
*ANSWER MUST BE IN 2 DECIMAL.