2. An investment opportunity will pay $50 with a 10% probability,$20 with a 40% probability,

profiletutor4helpyou
question.docx
Home>Mathematics homework help>Numerical analysis homework help>2. An investment opportunity will pay $50 with a 10% probability,$20 with a 40% probability,

2. An investment opportunity will pay $50 with a 10% probability,$20 with a 40% probability, and will result in a loss of $20 with a 50% probability. What is the expected value of the investment? 3. A firms plans to raise $4million by borrowing at an interest rate of 16% and raise $1million by issuing common stock. The firm stock has a beta coefficient of 2 , the risk free interest rate is 6%, the average rate of return of stock is 9% and the marginal tax is 25%. What is the firm's composite cost of capital?