Free

The cost of equity of my companyslp 3 - Essay Example

Add to wishlist

Summary

Though my company is one of the largest real estate firms in the US, the effect on the financials of my company on that of the economy is very less. This would mean that the analysts and economists won't be very much interested in covering and following my company.
…

Download full paper File format: .doc, available for editing

GRAB THE BEST PAPER94.9% of users find it useful

Read Text Preview

Subject: Miscellaneous
Type: Essay
Level: College
Pages: 2 (500 words)
Downloads: 3
Author: jamalheathcote

Extract of sample "The cost of equity of my companyslp 3"

Cost of Equity Data Information The beta for my firm is assumed to be 5= beta. (Yahoo Finance) Yield to maturity for federal funds = Risk free rate of return = 4.54% = Rf. (Federal Reserve).Return on market portfolio = RmRm - Rf = 7% (Given) Rm = 11.54%Calculation of Cost of EquityUsing Capital Asset Pricing Model,Rate of Return = Cost of Equity = Rf + beta*(Rm - Rf) = 4.54 + 1.5*7 = 15.04% = beta(E)Calculation for asset beta: beta(A)beta(E) = beta(A)*(1 + (1 - T)*(D/E))T = tax rate = 34% = givenD = market value of debt = USD 136,288 (Report, September 2007) (ARC)E = market value of equity = USD 815,151 (Report, September 2007) (ARC)15.

04 = beta(A)*(1 + 0.66*(136,288/815,151))beta (A) = 0.074% The value of "asset beta" (beta(A)) represents the extent to which the company's business performance is related to the overall performance of the economy.In the present case the value of asset beta is found out to be 0.074%, which means that the business performance of my company (ARC) will have 0.074% effect on the overall economy of the country. The value calculated is very less which implies that the contribution of my company is only 0.

704% to the overall economy. Though my company is one of the largest real estate firms in the US, the effect on the financials of my company on that of the economy is very less. This would mean that the analysts and economists won't be very much interested in covering and following my company.The value of asset beta can be increased either increasing the market value of equity or decreasing the market value of debt for my company. The value can also change with the changes in tax rate. The increase in tax rate will increase the value of asset beta of my firm.

Bibliography10Q - Third Quarter Report [Report]/ auth. Report ARC Third Quarter.- September 2007.http://answers.yahoo.com/question/qid=20070907154738AAI8Vdj [Online]/ auth. Finance Yahoo.http://phx.corporate-ir.net/phoenix.zhtmlc=147468&p=irol-sec [Online]/ auth. ARC.- ARC.http://www.federalreserve.gov/releases/h15/update/ [Online]/ auth. Federal Reserve US.

Cite this document

APA
MLA
CHICAGO

(“The cost of equity of my companyslp 3 Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
The cost of equity of my companyslp 3 Essay Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/miscellaneous/1520435-the-cost-of-equity-of-my-companyslp-3

(The Cost of Equity of My Companyslp 3 Essay Example | Topics and Well Written Essays - 500 Words)
The Cost of Equity of My Companyslp 3 Essay Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/miscellaneous/1520435-the-cost-of-equity-of-my-companyslp-3.

“The Cost of Equity of My Companyslp 3 Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1520435-the-cost-of-equity-of-my-companyslp-3.

Cited: 0 times

CHECK THESE SAMPLES OF The cost of equity of my companyslp 3

MGM625-0903A-01 Applied Finance for Decision-Making - Phase 3 Discussion Board 2

This is mainly because of the fact that the interest paid is generally tax deductible and it can be included as business expenses unlike the cost of equity.... However, considering the cost of debt, it is seen that it includes, loss of future flexibility cost, agency cost and bankruptcy costs that can be levied on the companies (Samuels, Wilkes and Brayshaw, 2000).... It is seen that if the amount of debt taken by the firm increases, the cost of debt will also increase as the creditors would demand for high risk premiums, thereby decreasing the return on equity....

2 Pages (500 words) Essay

Long-Term Financing of Companies

The paper "Long-Term Financing of Companies" aims to explore the various long-term sources of financing, which specifically delves with one debt source—the bond offerings, and one equity source—the seasoned equity offerings.... Seasoned equity offerings or SEOs are stock issues for companies that are already publicly listed in the stock market (Sherman 2003).... If a company that has already undergone an IPO needs to raise substantial capital again and it chooses to issue new equity in order to finance it, this is called a seasoned equity offering (Butler, Grullon & Wetson 2005)....

7 Pages (1750 words) Essay

Stockholders' Equity (Assignment 10)

Identify the changes in your firms equity accounts that occurred during the most recent accounting period.... Not all firms Stockholders equity (Assignment 10) Identify the categories and amounts of your firms capital stock.... Identify the changes in your firms equity accounts that occurred during the most recent accounting period.... Briefly summarize the significant changes in stockholders equity, if any, which occurred during the most recent year....

2 Pages (500 words) Assignment

Analysis of stockholders' equity

From the information given in the… The reason for such an assumption is that the cost of producing the light-gauge aluminum is $22.... Therefore, so as to sell at a higher price the company incurs the cost of The cost incurred is included in the selling expenses.... Since units sold is 17000 rolls, so sales and cost of goods sold will be calculated on 17000, but the fixed cost incurred shall not be affected by the quantity of units sold, as fixed cost is independent to the amount of units sold c....

3 Pages (750 words) Assignment

Jaguar brand equity charter

From the section of the charter that you worked on, explain why this section is important to the understanding and identity of the equity of the brand Therefore, it is important to understand the identity of Jaguar brand equity because as well as acts as an important tool for determining the most appropriate marketing strategies to be applied.... Jaguar brand equity has brought numerous positive benefits to the company.... This has provided the company Topic: JAGUAR BRAND equity CHARTER Why is the companys view of the brand equity concept important?...

1 Pages (250 words) Assignment

Capital Structure and Cost on Capital

equity to finance the activities is classified in… Ordinary shares and retained earnings.... The capital structure will comprise of companys preferred and common equity, definite short-term and long-term debt.... Working capital is also considered to form the capital structure (Bierman, 2003). The capital The capital structure of a company will give a companys debt-to-equity ratio.... Companies should make substantial equity investments to sustain its financial operations at all times....

8 Pages (2000 words) Essay

Corporate Accounting

he equity of Santos Limited is comprised of its share capital, its retained earnings, and reserves.... These items include the company's equity, debt financing, tax accounting practices, and property, plant and equipment, the practices of Santos Limited as regards recording and accounting for its operations are delved upon.... The company's return on equity for 2008 is 48.... From 2007 to 2008, the company's equity has grown from 3093....

12 Pages (3000 words) Research Paper

Raising Capital from Bond and Equity Markets

The case study "Raising Capital from Bond and equity Markets" aims to explore how companies raise capital from the debt and equity markets.... These include initial public offering, seasoned equity offering, and straight debt issues.... If the company chooses to raise capital from equity financing, there are also various options.... Many practitioners, as well as academicians, regard IPOs as one of the most expensive ways to raise equity capital....

8 Pages (2000 words) Case Study