1. Can you compute the market beta of PepsiCo prevailing in early 2002 based on 3 years of daily stock returns? (You can download the data from Yahoo! Finance.) Would your beta estimate be different from the 0.70?
2. If your course covered this: What would be the alternative to using the CAPM for determining the appropriate cost of capital? Look back at the appendix of Chapter 9. Can you compute the cost of capital with this alternative, following the recipe?
3. When would you want to calibrate your pro forma model to available market data? Do you believe most pro formas are calibrated, whether they state it or not? Is caution advisable?
4. When would you want to use only one of your three calibration tools? When would you want to use all three?