Note that since none of the divisions carry their own debt, we have assumed that they are all funded using the same mix of debt and equity as Disney as a company.45 The costs of equity vary across the remaining divisions, with studio entertainment having the highest beta and parks and resorts the lowest.46

To estimate the cost of equity for Deutsche Bank, we will use the same risk premium (4.82%) that we have used for the U.S, since Deutsche's business is still primarily in mature markets in Europe and the United States. Using the 10-year German Euro bond rate of 4.05% as the Euro riskfree rate47 and Deutsche Bank's bottom up beta of 0.98, the cost of equity for Deutsche Bank is:

Table 4.12: Cost of Equity for Deutsche Bank



Cost of


45 Disney provides no breakdown of debt by division. If it did, we could use division specific debt to equity ratios.

46 If we consider cash as a division, the cost of equity is the riskfree rate because cash is invested in commercial paper and treasuries.

47 There are about 8 countries that issue 10-year Euro denominated bonds. We used the German Euro bond rate as the riskfree rate, not because Deutsche Bank was a German company, but because the German Euro bond rate was the lowest of the government bond rates. The Greek and Spanish 10-year Euro bond rates were about 0.20% higher, reflecting the perception of default risk in those countries. We would continue to use the German Euro bond rate to value Greek and Spanish companies in Euros.

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