1. Assume that the managers of Wolves Entertainment Corporation act in the best interests of its shareholders by following the primary goal of the firm as defined by finance. Which of the following capital structures (mix of debt and equity) should the firms managers choose?

1)	Stock Price=$20.00 Debt/Assets=40% Equity/Assets=60% Dividends=$1.25
2)	Stock Price=$25.00 Debt/Assets=50% Equity/Assets=50% Dividends=$1.75
3)	Stock Price=$30.00 Debt/Assets=60% Equity/Assets=40% Dividends=$1.65
4)	Stock Price=$26.00 Debt/Assets=70% Equity/Assets=30% Dividends=$1.55

2. You are holding a stock that has a beta of 2.59 and is currently in equilibrium. The required return on the stock is 26.18% and the return on a risk-free asset is 8.0%. What would be the return on the stock if the stock's beta increased to 3.57 while the risk-free rate and market return remained unchanged?

	33.06%
	61.62%
	26.18%
	49.60%
	29.08%

3. What is the expected return for the following stock? (State your answer in percent with one decimal place.) Outcomes Possible returns Probability better 33% 11% same 24% 25% worse 19% 64%

	21.79%
	19.24%
	23.60%
	24.95%
	26.82%