Find your question
and Get expert's answers*
Homework Help
*Click here to submit
Refer a Friend
Discount up to 15%*
Prepared References
Save up to 50%*
Homework Help >> Other Management
  Determine current cost of equity  

Your task is to determine CDW’s current cost of equity. Since the company is not yet publicly traded1, you need to estimate its cost of equity from a set of comparable companies. Use ‘Hamada’s Equation’2 to adjust for the impact of corporate debt on a firm’s cost of equity. Assume that CDW’s target debt ratio3, D/(E+D), is similar to its ratio of ‘long-term liabilities’ to ‘total assets’, that is, $3.731B/$5.700B ≈ 65%.

[1 CDW’s Form S-1 filing: www.sec.gov/Archives/edgar/data/1402057/000119312513122411/d501911ds1.htm]
[2 Hamada’s equation is explained at http://en.wikipedia.org/wiki/Hamada's_equation]
[3 The target debt ratio, D/(E+D), is different from the target debt-to-equity ratio, D/E!]

Question1 ) While adjusting for each firm’s debt level, estimate CDW’s cost of equity based on the following 5 companies: Apple Inc. (AAPL) Dell Inc. (DELL) EMC Corporation (EMC) SanDisk Corp. (SNDK) Seagate Technology Public Limited Company (STX)

Question 2) Select your own set of comparable companies and re-estimate CDW’s cost of equity.

Question 3) Explain why the set of comparables you selected is preferable to the set listed in Question 1.

Question 4) Explain how you forecast the risk-free rate (rf) and the excess return on the market (rmkt-rf).

Take a prinout of your write-up

Guidelines for formatting your Case Write-up

•    One inch margins on each side; double Line spacing
•    Cover page with group name, individual names in alphabetical order, assignment name, submission date.
•    Structured write-up (with subheadings if appropriate)
•    Maximum of four (4) pages
•    Appendix: Maximum of three (3) pages (for tables, graphs). Needs to be formatted.
•    Professional layout; Page numbers; Clearly labeled Tables, Names, Graphs, Exhibits

Ask an Expert for Solution

Ask an Expert for Answer Determine current cost of equity

Request for Solution Files

Expected delivery within 24 Hours

Course: Other Management

Ref. No:- TGS0467

Length: 7 pages




Like US:-
Assignment Help

Ask an Expert & Get Answer

  • Quality work delivery
  • 100% Plagiarism free
  • Time on delivery
  • Privacy of work
Order Now
More Other Management Questions


In a reflection of 450-600 words, explain how you see yourself fitting into the following IOM Future of Nursing recommendations:
Ob
Ob, Collegial model is an extension of: a. Supportive model b. Autocratic model c. Custodial model d. None of the above
Identify an innovation and design a plan for implementing it in an organization in which you are involved, such as your workplace, school, church, o
William was delighted when he was selected for a very competitive internship at a consulting firm near his university. Many students had applied, an
Select a topic from the list below and undertake a literature review on the topic to write a research paper. Literature cited should include most re
Assess the leadership, interpersonal skills, and earned values on other areas of concentration you deem necessary to rate the overall performance of
The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (o
Solve this question, A Dental Clinic requires a computerized system to automize its front office operations that support the following functionalitie
Define and explain what segmentation is, and discuss different segmentation bases you could use for your product/service.
If the emitted sound has a frequency of 260 Hz and a sound level of 85 dB (near the eardrum), what is the amplitude of the eardrum's oscillation the