Nielson's share price is closest to:
A)$20.80
B)$24.40
C)$27.50
D)$31.20

Question

Quizplus · Accepted Answer

A)β_u= 11ea7cce_3caa_b8be_928c_2bbb74a8ba71_TB1626_11 β_E + 11ea7cce_3caa_b8bf_928c_19edee71b544_TB1626_11 β_D Using the comparable firm β_u = 11ea7cce_3caa_dfd0_928c_e1c1bf855c64_TB1626_11 (1.8)+ 11ea7cce_3caa_dfd1_928c_e79aa909875d_TB1626_11 (0.4)= 0.96 Now plugging in this for Nielson gives us β_u= 0.96 = 11ea7cce_3caa_dfd2_928c_c550d7b5ec04_TB1626_11 (β_E)+ 11ea7cce_3cab_06e3_928c_8bf92ff5a1b0_TB1626_11 ₍₀₎→β_E=0.96 × 1.5 = 1.44 Plugging into the CAPM = r_e = r_f+ β_E(r_m - r_f)= 5% + 1.44(10% - 5%)= 12.2% r_{wacc =} 11ea7cce_3cab_06e4_928c_870e3cefc102_TB1626_11 r_{e +} 11ea7cce_3cab_06e5_928c_3fc8dc346e42_TB1626_11 r_d(1 - T_c)= 11ea7cce_3cab_2df6_928c_6b2d82863d28_TB1626_11 (.122)+ 11ea7cce_3cab_2df7_928c_1346dac4571f_TB1626_11 (.05)(1 - .40)= 9.1333% Value = 11ea7cce_3cab_2df8_928c_f172b6c0b125_TB1626_11 = 11ea7cce_3cab_5509_928c_9bf75daedc3b_TB1626_11 = 779.22 of this amount 11ea7cce_3cab_550a_928c_1163a5c4c4eb_TB1626_11 or 11ea7cce_3cab_550b_928c_63e166fa5dcd_TB1626_11 is equity Equity = 779.22 × 2/3 = $519.48 million/25 million shares = $20.78 per share

Nielson's Share Price Is Closest To