FIN515 Financial Management Week 5 Quiz; Devry University 2015

1. (TCO C) Company A has a beta of 2.77. Company B has a beta of .73. Company C has a beta of .90. The risk free rate is 6% and the market risk premium is 4%. What is the expected return of investing in Company A? Show your work. (Points : 5)

2. (TCO C) Your stock portfolio consists of only two stocks. You have $30,000 in Company A and $35,000 in Company B. Company A has an actual return of -8% and Company B has a return of 12%. What is the return on your portfolio? Show your work. (Points : 5)

3. (TCO E) A company has a capital structure of 40% debt and 60% equity. The YTM on the company’s bonds is 9%, and the company’s effective tax rate is 40%.  The cost of equity is 13%. What is the company’s WACC? Show your work. (Points : 10)