You’re working as a financial analyst for Dillard’s Inc(NYSE: DDS). Your boss wa
ID: 2662520 • Letter: Y
Question
You’re working as a financial analyst for Dillard’s Inc(NYSE: DDS). Your boss wants to open a slew of department stores inNew York and New England, and has asked you to estimate theappropriate cost of capital to use when evaluating thisproject.1. Estimate the equity beta of Dillard’s Inc using OLSregression and the market model.
2. Identify other companies in the industry that should be ofsimilar risk to the project and find their betas.
3. Adjust the comparable betas, if necessary, for capital structuredifferences and take the median adjusted beta.
4. Which beta should you use to evaluate the project? (i.e. Fromquestion 1 or question 3) Why?
5. Estimate the WACC for the project.
Explanation / Answer
Are you provided with data or are you suppose to find them online? For example, what data should I use for the OLS regression?
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