Homework answers / question archive / Beta Regression I Name Raquel Peterson Email Address Company Picked for Have you Project found a (Please Time group yet? enter Zone(+ or - (Yes or company hours No, No name, not relative to details just WA time needed) symbol) raquelp@ uw

Beta Regression I Name Raquel Peterson Email Address Company Picked for Have you Project found a (Please Time group yet? enter Zone(+ or - (Yes or company hours No, No name, not relative to details just WA time needed) symbol) raquelp@ uw

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Beta Regression I Name Raquel Peterson Email Address Company Picked for Have you Project found a (Please Time group yet? enter Zone(+ or - (Yes or company hours No, No name, not relative to details just WA time needed) symbol) raquelp@ uw.edu PT Yes Corporate Goveranc e Measure (0 is weakest-2 is Marginal strongest) Investor Red Robin Gourmet Burgers, 1 (Per Inc Yahoo (RRGB) Finance) Institution Jensen' s Alpha (% R Regress annualiz Square ion Beta ed) d (%) Accounting Returns Cost of Capital(Hurlde Rate) Bottom Equity up Risk Levered Premiu Beta (%) m Cost of equity (%) Debt to Capital Ratio Cost of debt (pretax) (%) Cost of Capital (%) Return on Equity (%) Return on Capital Attach reasonable weights to each component and estimate a unlevered beta for the business. o Using the current leverage of the company, estimate a levered beta for each component. 2. Choosing Between Betas o Which of the betas that you have estimated for the firm (top down or bottom up) would you view as more reliable? Why? o Using the beta that you have chosen, estimate the expected return on an equity investment in this company to ? a short term investor ? a long term investor o As a manager in this firm, how would you use this expected return? 3. Estimating Default Risk and Cost of Debt o If your company is rated, ? What is the most recent rating for the firm? ? What is the default spread and interest rate associated with this rating? ? If your company has bonds outstanding, estimate the yield to maturity on a long term bond? Why might this be different from the rate estimated in the last step? ? What is the company's marginal tax rate? o If your company is not rated, ? Does it have any recent borrowings? If yes, what interest rate did the company pay on these borrowing? ? Can you estimate a ìsyntheticî rating? If yes, what interest rate would correspond to this rating?) 4. Estimating Cost of Capital o Weights for Debt and Equity ? What is the market value of equity? ? Estimate a market value for debt. (To do this you might have to collect information on the average maturity of the debt, the interest expenses in the most recent period and the book value of the debt) ? What are the weights of debt and equity? o Cost of Capital ? What is the cost of capital for the firm?