Woolworths Ltd (WOW) has a debt to equity ratio of approximately 1:2. You are considering purchasing...
Woolworths Ltd (WOW) has a debt to equity ratio of approximately 1:2. You are considering purchasing supermarket business (like Woolworths) but your business will target a Debt-to-equity of 1 to 1.83 (i.e 1:/1.83).
What is the required return on equity relevant to the the new business, given:
- WOW beta of 0.95.
- risk free rate is 2.6% p.a,
- WOW and the new business can borrow at 5%p.a,
- the tax rate is 30%
- a reasonable estimate of the equity market premium is 6%.
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considering changing its capital structure to 65% equity and 35%
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please show in excel
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