Re计算问题

问题如下：

Schwalke is currently valuing LPE, a private furniture manufacturing company based in France. To estimate LPE’s required return on equity, Schwalke gathers betas from public furniture manufacturing companies, and after making appropriate adjustments, estimates LPE’s beta at 0.80. He uses an equity risk premium of 6%, a small-cap stock premium of 2%, a company-specific stock premium of 1.5%, and an industry risk premium of 1%. Which amount most accurately reflects the difference between Schwalke’s estimates of LPE’s required return on equity using the build-up approach versus the expanded CAPM?

选项：

A.

1.0% (build-up > expanded CAPM)

B.

1.2% (build-up > expanded CAPM)

C.

2.2% (build-up > expanded CAPM)

解释：

C is Correct. The build-up method is the sum of the equity risk premium (6%), small-cap stock premium (2%), company-specific premium (1.5%), and industry risk premium (1%), or 10.5%.

The expanded CAPM reflects the sum of the beta-adjusted equity risk premium (0.8×6%), the small-cap stock premium (2%), and the company-specific premium (1.5%), or 8.3%.