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:]
[2 Hamada’s equation is explained at'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

Select a Region/Country/State/City of your choice and prepare a report on the current state of hazardous waste management. Such report, normally ref
You bring up a very important point when you mention the importance of clearly defining the "idea" before designing an experiment. It is important t
Having read the article, do you think that public disclosure diminishes information asymmetry within an organization and in the market? How does thi
Measurement and decision making, Cost Reduction In required reading 3 (Walther n.d. in Week 4, three sets of data are presented in the section ‘Levera
Read the "JET Copies" Case Problem on pages 678-679 of the text. Using simulation estimate the loss of revenue due to copier breakdown for one year,
Research the responsibility of a critical thinker in a contemporary society. You may choose any topic that deals with a contemporary social concern.
A housing estate of 250 people is considered to be at risk from a nearby factory on the basis of a hazard analysis which yielded the following data:
In everything we do there will always be obstacles to face. Healthcare organizations are no different in that challenges can and do affect strategy.
As a mental health professional in the new era, consider how the appropriate application of statistical analysis can be used to understand real-worl
Describe and explain how technology complexity affects organizational structure? What role does technology in the form of knowledge play in the prod