3. If the beta of Risky Corp. stock is 2.0, the risk-free rate of interest is 4% and the return on the market portfolio is 8%, what is the required return on Risky Corp. stock?

4. Suppose your company needs $20 million to build a new assembly line. Your target capital structure is 25 percent debt and 75 percent equity. The flotation cost for new equity is 6 percent, but the floatation cost for debt is only 2 percent. What is the true cost of building the new assembly line after taking flotation costs into account

Show details of solutions. You have the following information for the stock of Risky Corp. 1. What is the expected return for Risky Corp. stock? 2. What are the variance and standard deviation for Risky Corp. stock