--%>
Assignment Help - homework help

An example of use beta of Kinepolis in this valuation

A financial consultant is valuing the company I set as an objective (an entertainment centre) by discounting the cash flows until the end of the dealership at 7.26% (interest rate on 30-year-bonds = 5.1%; market premium = 5%, and Beta = 0.47%). 0.47 is a beta provided by Bloomberg for Kinepolis (the company whose activity is the management of several cinemas in the EU), in function of the Dax Index. Is it correct to use the beta of Kinepolis in this valuation?

E

Expert

Verified

No, it is obviously not correct to use the beta of Kinepolis in this valuation. The required return to shares (7.26 percent) is a ridiculous number for an entertainment center. In the use of calculated betas.

   Related Questions in Corporate Finance

  • Q : Calculate their after tax cost of debt

    Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of whichrequire semiannual interest payments. Bond A has a coupon rate of 4.0%; a price qu

    		•
  • Q : Problem on HIBOR Below are the

    Below are the three-month HIBOR and three-year EFN futures (that is, Exchange Fund Note) prices for the September 2010 contracts.a) Find out the HIBOR in three-months for settling the future contract utilizing the quotation on August 16.

    Q : What are Workpapers Workpapers : In

    Workpapers: In finance world, work papers are documents which are created during the procedure of computing the financial records of a business or individual. The accounting professional which is tasked with examining the book-keeping of a business mi

    		•
  • Q : Strategy of Bear Spread State when

    State when markets are anticipated to go down then what is the Strategy of Bear Spread?

    		•
  • Q : Active versus Passive fund managers

    Active vs. Passive fund managers: Passive fund managers adopt a long term buy and hold strategy. Usually, stocks are purchased so that the portfolio’s returns will track those of an

    		•
  • Q : Problem on car rental plans Ape Car

    Ape Car Rental plans to begin its business by buying 10 cars at the average price of $18,000 each, depreciating them entirely over 5 years utilizing the straight-line method. It will rent space in a parking lot for $300 a month, paying the rent in advance every month.

    		•
  • Q : Weighted return and simple return to

    What is the difference between weighted return and simple return to shareholders?

    		•
  • Q : What is nonlinearity in option pricing

    What is nonlinearity in option pricing model?

    		•
  • Q : DCF Analysis AB Corp. is in the

    AB Corp. is in the business of making white-board markers. They are computing the potential of investing in some new equipment that will enhance their manufacturing process.  The initial cost of the latest machinery is $470,000 plus a one-time installation cost o

    		•
  • Q : Problem on Yield to maturity Shawna

    Shawna desires to invest her recent bonus in a 4-year bond which pays a coupon of 11 % semi-annually. The bonds are selling at $962.13 nowadays. When she buys such bond and holds it to the maturity, what would be her yield? (Round to the nearest answer.) (i) 11.5%&nbs

    		•