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Flashcards in Week 15 - Workshop Questions Deck (12)
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1

How is the ‘Asset Beta’ Calculated for firms?

Equity Beta* Market Cap./Total enterprise Value +

Debt Beta* (1- Market Cap./Total enterprise value)

2

How to calculate the ‘Required return’ for a business using Beta?

RFR+Beta *(Rm)

3

How to calculate a companies cost of capital (Almost WACC)?

E/E+D*Required return of E +

D/E+D*RFR

4

Has a firm outperformed the CAPM Expected return?

1) What has the firm returned?
Covariance/SDm’(Squared)

2) What was the CAPM expected return?
RFR+B (Rm-RFR)

5

How is the Alpha of a Stocks Expected return calculated?

Alpha = Beta Return of business - CAPM

6

How do you estimate a bonds expected return using the CAPM and an estimated beta?

RFR+B*Market Risk rate

7

How do you estimate a bonds expected value using the Yield to Maturity?

YTM-Default Risk*Expected loss in event of default

8

What is ‘Re’ equal to?

The Required Rate of Return

9

What is ‘Rd’ equal to?

Rd is equal to the Risk Free Rate

10

What is the ‘Dividend Discount Model’ (DDM) formula?

DDM = (D1 +g/ Price)+g

11

The ‘SML’ method is the same as what?

The CAPM model

12

How is the ‘Equity Beta’ calculated from the ‘Debt beta’ and value of two divisions?

Value of D1/T. Value*D1Beta + Value of D2/T.Value*D2Beta