Business, 01.04.2020 18:31 mommies3grls3

You run a regression of monthly returns of Mapco, an oil- and gas-producing firm, on the S&P 500 Index and come up with the following output for the period 1991 to 1995.

Intercept of the regression = 0.380%; X-coefficient of the regression =0.55; Standard error of X-coefficient =0.2; R2=55.0%

There are 18.00 million shares outstanding, and the current market price is $6.00/share. The firm has $20.00million in debt outstanding. The firm has a tax rate of 40.00% percent.

1.

a. What would an investor in Mapco’s stock require as a return, if the Treasure bond rate is 4.00%percent? Use 5.00% as the market risk premium?

b. Assume now that Mapco has three divisions. It plans to divest itself of one of the divisions for $22.00 million in cash and acquire another for $67.00 million (it will borrow $45.00 million to complete this acquisition). The division it is divesting is in a business line where the average unlevered beta is 0.35, and the division it is acquiring is in a business line where the average unlevered beta is 0.88. What will the beta of Mapco be after this acquisition?

2.Unlevered beta of Mapco before restructuring?
3.Current firm size?
4.Unlevered beta of the remaining divisions?
5.Firm size after restructuring (i. e. after divesting a division and acquiring the new division)?
6.Total debt after restructuring (i. e., after divesting one division and purchasing a new division)?
7.Unlevered beta after restructuring?
8.Levered beta after restructuring.

Answers: 2

Show answers

Another question on Business

Business, 22.06.2019 04:00

The simple interest in a loan of $200 at 10 percent interest per year is

Answers: 2

Answer

Business, 22.06.2019 12:30

Consider a treasury bill with a rate of return of 5% and the following risky securities: security a: e(r) = .15; variance = .0400 security b: e(r) = .10; variance = .0225 security c: e(r) = .12; variance = .1000 security d: e(r) = .13; variance = .0625 the investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above. the security the investor should choose as part of her complete portfolio to achieve the best cal would be a. security a b. security b c. security c d. security d

Answers: 3

Answer

Business, 22.06.2019 20:10

Russell's is considering purchasing $697,400 of equipment for a four-year project. the equipment falls in the five-year macrs class with annual percentages of .2, .32, .192, .1152, .1152, and .0576 for years 1 to 6, respectively. at the end of the project the equipment can be sold for an estimated $135,000. the required return is 13.2 percent and the tax rate is 23 percent. what is the amount of the aftertax salvage value of the equipment assuming no bonus depreciation is taken

Answers: 2

Answer

Business, 22.06.2019 22:30

Which of the following situations is most likely to change a buyer's market into a seller's market? a. a natural disaster that drives away a lot of the population. b. the price of building materials suddenly going up. c. the government buys up a lot of houses to build a new freeway. d. a factory laying off a lot of workers in the area.

Answers: 1

Answer

You know the right answer?

You run a regression of monthly returns of Mapco, an oil- and gas-producing firm, on the S&P 500...

Questions