1:Twice Shy Industries has a debtequity ratio of 1.2. Its WACC is 9.4 percent, and its cost of debt is 6.5 percent. The corporate tax rate is 35 percent.

a.	What is the companys cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity capital

%

b.	What is the companys unlevered cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Unlevered cost of equity capital

%

c-1	What would the cost of equity be if the debtequity ratio were 2? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity

%

c-2	What would the cost of equity be if the debtequity ratio were 1.0? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity

%

c-3	What would the cost of equity be if the debtequity ratio were zero? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity

%

2:

Consider the following information:

				Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy			Stock A			Stock B			Stock C
Boom		.10			.30			.40			.20
Good		.50			.15			.11			.09
Poor		.35			.02			.05			.03
Bust		.05			.10			.15			.07

a.	Your portfolio is invested 32 percent each in A and C, and 36 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculaitons. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return

%

b-1	What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)

Variance

b-2	What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation

%

3:

Consider the following information:

		Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B	Stock C
Boom	0.72	0.19	0.07	0.15
Bust	0.28	0.19	0.13	0.13

Requirement 1:

What is the expected return on an equally weighted portfolio of these three stocks? (Do not round your intermediate calculations.)

(Click to select)14.04%16.54%26.07%28.84%8.31%

Requirement 2:

What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round your intermediate calculations.)

(Click to select)0.0035000.0077000.0055000.0080000.000000