1.Portfolio Beta and Required Return You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 12 percent and the risk-free rate is 3.5 percent, what is the required return of the portfolio?

Price Shares Beta

Amazon.com $40.80 100 3.8

Family Dollar Stores 30.10 150 1.2

McKesson Corp. 57.40 75 0.4

Schering-Plough Corp. 23.80 200 0.5

2.WACC Suppose that B2B, Inc., has a capital structure of 37 percent equity, 17 percent preferred stock, and 46 percent debt. If the before-tax component costs of equity, preferred stock, and debt are 14.5 percent, 11 percent, and 9.5 percent, respectively, what is B2B's WACC if the firm faces an average tax rate of 30 percent?

3.Firmwide versus Project-Specific WACCs An all-equity firm is consider- ing the projects shown below. The T-bill rate is 4 percent and the market risk premium is 7 percent. If the firm uses its current WACC of 12 per- cent to evaluate these projects, which project(s), if any, will be incorrectly rejected?

Project Expected Return Beta

A 8.0% 0.5

B 19.0 1.2

C 13.0 1.4

D 17.0 1.6