Busıness Fınance Iı Deneme Sınavı Sorusu #1030194

XLM Corp. has a bond issue outstanding for which the yield-to-maturity is 8.45%. Analysts estimate a risk premium of 3.15% for the company's stock. What is the expected cost of equity of XLM according to the bond-yield-plus-risk-premium approach?


05.53%

10.30%

11.60%

12.45%

14.90%


Yanıt Açıklaması:

The bond-yield-plus-risk-premium approach provides a practical but highly subjective solution to the estimation of the cost of equity. The approach is based upon adding up a risk premium over the firm’s bond yield. Thus, the cost of equity is calculated straightforward by the following simple computation:

k= 0.0845 + 0.0315= 0.1160

According to the bond-yield-plus-risk-premium approach, XLM’s expected cost of equity is 11.60%. The correct answer is C.

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