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


You should prepare a draft Individual Development Plan (IDP) for yourself. You can do this on a self-developed form or follow a prescribed format th
Describe how the New Deal transformed the relationship between the federal government and American citizens. Were there drawbacks to the help offere
Select a Region/Country/State/City of your choice and prepare a report on the current state of municipal solid waste management. Such report, normal
Psychologists inevitably face situations where clients initiate a discussion or interaction that could lead to multiple relationships or boundary is
Write a 2 page paper describing cost, quality and access from the point of view from provider and government and third party payors and patient. Thi
International trade is a complex area of study. Effects of policies, currencies, tariffs, trading arrangement, and other variables not only impact a
How can you continue to practice what you've learned this term about public speaking and effective communication? What opportunities for public spea
Because of the rising crime rate and the nation's tougher stance on crime, many states have enacted legislation that eliminates discretion for sente
Multidisciplinary teams (MDT) have been recognised as an effective model of providing healthcare. In your essay, refer to evidence in the literature
Write your ideas and taught about. Equality, Morality and Humanitarianism, 100 words Wirte your view about ethnocentrism, 100 words