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vivado [14]
3 years ago
12

Estimating Components of both WACC and DDM Analysts estimate the cost of debt capital for Abbott Laboratories (NYSE: ABT) is 2.1

3% and that its cost of equity capital is 4.1%. Assume that ABT's marginal tax rate is 36%, the risk-free rate is 5.3%, the market risk premium is 5.7%, the ABT market price is $47.73 per common share, and its dividends are $1.26 per common share.
(a) Compute ABT's average borrowing rate and its market beta.
(b) Assume that its dividends continue at the current level in perpetuity.
Business
1 answer:
NARA [144]3 years ago
8 0

Answer:

a. Average borrowing rate= debt cost=2.13

Beta = 4.1-5.3/5.7= -0.2105

b.

Equity cost =dividend /price=1.26/47.73=0.0264= 2.64%

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A stock has an expected return of 15.1 percent, the risk-free rate is 5.95 percent, and the market risk premium is 7.8 percent.
horsena [70]

Answer:

1.17%

Explanation:

Expected return is 15.1 %

Risk free rate is 5.95 %

Market risk premium is 7.8%

Therefore the beta can be calculated as follows

Expected return= risk free rate + (beta×market risk premium)

15.1%= 5.95% + (beta × 7.8%)

15.1%-5.95%= 7.8% beta

9.15%= 7.8% beta

beta= 9.15%/7.8%

beta= 1.17%

6 0
3 years ago
Your brother, who is prone to bearing substantial risk, suggests that you buy a security for $10,000 that promises to pay you $1
astraxan [27]

Answer:

16.59%

Explanation:

First we look at the formula which to determine the future value of the security and then work back to determine the annual return in terms of percentage

Future Value = Present Value x (1 +i)∧n

where i = the annual rate of return

n= number of years or period

We then plug the given figures into the equation as follows

we already know Present value to be $10,000 and the future value to be $100,000 and the number of years to be 15

Therefore, the implied annual return or yield on the investment is

100,000 = 10,000 x (1+i)∧15

(1+i)∧15 = 100,000/10,000 = 10

1 + i = (10∧(1/15))=1.165914

i= 1.165914-1

= 0.1659

= 16.59%

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Fiesta28 [93]

Answer:

D The number of jobs in marketing is on the rise

Explanation:

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ivanzaharov [21]
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