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2. A $1 million portfolio is currently invested in fund A. Fund A beta is 1.50 . The portfolio manager considers switehing some of the
2. A $1 million portfolio is currently invested in fund A. Fund A beta is 1.50 . The portfolio manager considers switehing some of the portfolio into fund B that has a beta of 0.60 . What would be the new portfolio dollar allocation (investment in A and in B) that will achieve his portfolio beta of 1.05 goals? 3. Skywalker Inc is an all equity company with a current stock beta estimated at 1.40. The risk-free rate is 2.0% and market risk premium is 5.5%. The firm Return on Equity is 15.0%. Recently reported earning per is $2.00. Management announces perpetual dividend payout policy of 80%. a. Calculate Skywalker stock current stock price. b. Skywalker management considers an expansion project that requires a $2.5 million investment and will generate next year a cash flow of $250,000. This cash flow is expected to grow at 2.0% in perpetuity. Should they accept the project
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