question archive Doremi Bhd is a main distributor of musical instruments in Malaysia and Thailand
Doremi Bhd is a main distributor of musical instruments in Malaysia and Thailand
Subject:AccountingPrice:2.87 Bought7
Doremi Bhd is a main distributor of musical instruments in Malaysia and Thailand. The firm had a market capitalization of RM148 billion last December. Based on the financial reports released recently, it had debt of RM15 billion, and cash (including short-term investments) of RM36 billion. Its equity beta was 1.8 and its debt beta was approximately zero. Assume that the risk-free rate is 3.5% per annum and the market risk premium is 5% per annum, calculate the firm's enterprise value and beta value.
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Answer:
Enterprise Value
EV = Market Value of Equity + Market Value of Debt - Cash Value
EV = 148 + 15 - 36
EV = 127
Beta Value
Beta of Company = Beta of Equity * (Value of Equity / Total Value)
as Beta of Debt is Zero
Beta = 1.8 * 148/(148+15)
Beta Value = 1.8*0.9079
Beta Value = 1.6344
