Use theUse the firm has only been listed on the stock exchange for a short time,you do not have an accurate assessment of Nielson's equity beta.However,you do have the following data for another firm in the same industry: Nielson has a much lower debt-equity ratio of .5,which is expected to remain stable,and Nielson's debt is risk free.Nielson's corporate tax rate is 21%,the risk-free rate is 5%,and the expected return on the market portfolio is 10%.
-Nielson's share price is closest to:
A)$19.57.
B)$24.40.
C)$27.50.
D)$31.20.

Question

Use theUse the firm has only been listed on the stock exchange for a short time,you do not have an accurate assessment of Nielson's equity beta.However,you do have the following data for another firm in the same industry:  Nielson has a much lower debt-equity ratio of .5,which is expected to remain stable,and Nielson's debt is risk free.Nielson's corporate tax rate is 21%,the risk-free rate is 5%,and the expected return on the market portfolio is 10%.
-Nielson's share price is closest to:
A)$19.57. 
B)$24.40. 
C)$27.50. 
D)$31.20.

Quizplus · Accepted Answer

Nielson's share price is closest to $19.57.

Use TheUse the Firm Has Only Been Listed on the Stock