我不是这个专业的学生，老师指定我选修这门课。
实在不知道怎么做这个题，如果有谁给点建议（做题的过程），将不胜感激。
谢谢了。
1. (8%)You are analyzing Tiffany, an upscale retailer, and find that the regression estimate of the
firm’s beta is 0.68; the standard error for the beta estimate is 0.45. The average
unlevered beta of comparable specialty retailing firms is 1.18.
a. If Tiffany has a debt/equity of 30%, estimate the beta for the company based upon
comparable firms. (Tax rate= 40%.)
b. Estimate a range for the beta from the regression.
c. Assume that Tiffany’s is rated BBB and that the default spread for BBB rated firms is
1% over the treasury bond rate. If the treasury bond rate is 6.0%, estimate the cost of
capital for the firm.
2. (8%) The standard deviation in the Mexican Equity Index is 50% and the standard
deviation in the S&P 500 is 18%. You use an equity risk premium of 5.7% for the
United States.
a. Estimate the country equity risk premium for Mexico using the equity
standard deviations.
b. Now assume that you are told that Mexico is rated BBB by Standard and
Poor’s and that it has dollar denominated bonds outstanding that trade at a
spread of about 3% above the treasury bond rate. If the standard deviation in
these bonds is 24%, estimate the country risk premium for Mexico.
3. (8%)An analyst has computed a ratio of firm value (which he has defined as the market value of equity plus long term debt – cash) to earnings before all interest expenses and taxes.
a. Explain why this ratio is not consistently estimated.
b. Explain why this might be a problem when comparing firms using this multiple.
4(12%) You are now valuing the Southwest Bank, a small bank that is growing rapidly. The bank reported earnings per share of $2.00 in the just-completed financial year and paid out dividends per share of $0.20. The book value of equity at the beginning of the year was $14.00. The beta for the stock is 1.10, the risk free rate is 6% and the risk premium is 4%.
a. Assuming that it will maintain its current return on equity and payout ratio for the next 5 years, estimate the expected growth rate in earnings per share. b. Assuming that the firm will start growing at a constant rate of 5% a year beyond that point in time, estimate the value per share today. (You can assume that the return on equity will drop to 12% in stable growth and that the beta will become 1.)
5. (16%)Southwestern Bell, a phone company, is considering expanding its operations into the media business. The beta for the company at the end of 2010 was 0.90 and the debt/equity ratio was 1.The media business is expected to be 30% of the overall firm value in 2014 and the average beta of comparable firms is 1.20; the average debt/equity ratio for these firms is 50%. The marginal corporate tax rate is 36%.
a. Estimate the beta for Southwestern Bell in 2014, assuming that it maintains its current debt/equity ratio.
b. Estimate the beta for Southwestern Bell in 2014, assuming that it decides to finance its media operations with a debt/equity ratio of 50%.
6。Church & Dwight, a large producer of sodium bicarbonate, reported earnings per share of $1.50 in 2010 and paid dividends per share of $0.42. In 2010, the firm also reported the following:
Net Income = $30 million
Interest Expense = $0.8 million
Book Value of Debt = $7.6 million
Book Value of Equity = $160 million
The firm faced a corporate tax rate of 38.5%. (The market value debt to equity ratio is 5%.) The treasury bond rate is 7%. The firm expected to maintain these financial fundamentals from 1994 to 1998, after which it was expected to become a stable firm with an earnings growth rate of 6%. The firm's financial characteristics were expected to approach industry averages after 1998. The industry averages were as follows:Return on Capital = 12.5%
Debt/Equity Ratio = 25%
Interest Rate on Debt = 7%
Church and Dwight had a beta of 0.85 in 1993 and the unlevered beta was not expected to change over time.a. What is the expected growth rate in earnings, based upon fundamentals, for the high
growth period (2011 to 2015)?
b. What is the expected payout ratio after 2015?
c. What is the expected beta after 2015?
d. What is the expected price at the end of 2015?
e. What is the value of the stock, using the two-stage dividend discount model?
f. How much of this value can be attributed to extraordinary growth? to stable growth?
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