1.

You are trying to come up with an estimate for the stock price of the Clorox Company. As part of this analysis, you plan to calculate Clorox's required return on equity using the CAPM formula. Which number below is the best choice to use as the risk-free rate in that equation?

Group of answer choices

Clorox's debt yield to maturity

The 3-month U.S. Treasury yield

The 1-year U.S. Treasury yield

The 5-year U.S. Treasury yield

The 30-year U.S. Treasury yield

The risk premium on the S&P 500

All of the above

2.

A candy factory is building an extension to its taffy puller. This will require spending $18 million today. This project will then generate $2 million in incremental free cash flow each year for the next 20 years (from t=1 to t=20). The firm is financed half with equity and half with debt (it has essentially no cash). The firm's equity beta is 0.8, debt yield to maturity is 4.0%, and tax rate is 20%. The expected return on the S&P500 Index is expected to be 7.0% each year and the relevant risk-free rate is 2.0%. What is the NPV of this project (in millions)?

Group of answer choices

-10.8

-5.6

-1.3

0

4.5

7.8

3.

Your portfolio comprises four investments, with an equal dollar value invested in each. The four investments are 1) the S&P 500 market portfolio, 2) shares of Tesla stock, 3) a General Motors bond, and 4) cash in a bank savings account which pays a guaranteed 0.50% interest this year. The CAPM betas for Tesla stock and the GM bond are 1.97 and 0.60, respectively. What is the beta of your entire portfolio?

Group of answer choices

0.67

0.89

1.01

1.20

1.44

1.67