Flashcards in Week 15 - Workshop Questions Deck (12)
How is the ‘Asset Beta’ Calculated for firms?
Equity Beta* Market Cap./Total enterprise Value +
Debt Beta* (1- Market Cap./Total enterprise value)
How to calculate the ‘Required return’ for a business using Beta?
How to calculate a companies cost of capital (Almost WACC)?
E/E+D*Required return of E +
Has a firm outperformed the CAPM Expected return?
1) What has the firm returned?
2) What was the CAPM expected return?
How is the Alpha of a Stocks Expected return calculated?
Alpha = Beta Return of business - CAPM
How do you estimate a bonds expected return using the CAPM and an estimated beta?
RFR+B*Market Risk rate
How do you estimate a bonds expected value using the Yield to Maturity?
YTM-Default Risk*Expected loss in event of default
What is ‘Re’ equal to?
The Required Rate of Return
What is ‘Rd’ equal to?
Rd is equal to the Risk Free Rate
What is the ‘Dividend Discount Model’ (DDM) formula?
DDM = (D1 +g/ Price)+g
The ‘SML’ method is the same as what?
The CAPM model