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1. The Wilson Corporation has the following relationships: Total Assets $5,000,000 Sales/Total assets 2.0 Return on assets (ROA_4% Return on equity (ROE) 8% NI $1,000,000
1. The Wilson Corporation has the following relationships: Total Assets $5,000,000 Sales/Total assets 2.0 Return on assets (ROA_4% Return on equity (ROE) 8% NI $1,000,000 What is Wilson's debt ratio? 2. The Guardian Investment Fund has a total investment of $400 million in five stocks: Stock Investment Stock's Beta Coefficient 3.0 A $120 million 0.5 B $100 2.0 $60 4.0 D $80 1.0 E $40 The current risk-free rate is 1 percent, and the market return is 11%. A. Calculate the beta of the portfolio. B. Calculate the required rate of return on the Guardian Investment Fund. C. Suppose you are the manager of the fund and receive a proposal to buy a new stock. The investment needed to take a position in the stock is $50 million; it will have an expected return of 25 percent; and its estimated beta coefficient is 2. Should the new stock be purchased? At what expected rate of return would management be indifferent to purchasing the stock
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