$4.(20$ points$)$ Hot Pockets Corporation is considering going public. Managers want to estimate common stock value. The standard deviation of returns for this firm is $20\%.$ The firm$$s beta is $0\mathrm{.}8.3-$month T$-$Bills currently trade at a discount to par of $2\%$ on an annualized basis. The expected return on the stock market is $11\%.$ There are $10,000$ shares of common stock outstanding. Assume the firm$$s capital structure is $40\%$ debt, $60\%$ common equity, the cost of debt is $6\%,$ and the marginal tax rate for the firm is $21\%.$

a$)$ What is the total risk of this firm, and what is its systematic risk?

b$)$ What is the expected return of this stock? What is the name of the model you use to estimate it$?$

c$)$ What is the Weighted Average Cost of Capital for the firm?

d$)$ Using WACC as the appropriate discount rate, if the firm$$s estimated free cash flows over the next $3$ years are:

Year Estimated Free Cash Flow

$2018$ $$100,000$

$2019$ $$200,000$

$2020$ $$300,000$

and after $2020$ to infinity, expected free cash flows will grow at a rate of $4\%$ per year: $($i$)$ what is the enterprise value of the firm $($i$.$e$.,$ debt $+$ equity$)?$

e$)($i$)$ If an investor in Hot Pockets owns equal amounts of Hot Pockets, Nextera Energy, Southwest Airlines, and Caterpillar common stock, what will the market risk of his$/$her portfolio be$?($Assume standard deviation of $10\%,30\%,$ and $25\%,$ and beta of $\mathrm{.}5,1\mathrm{.}5,$ and $1$ for each of Nextera Energy, Southwest Airlines, and Caterpillar common stock.$)($ii$)$ Given the above information, what will be the percentage return on this investor$$s portfolio if the market goes up $10\%?$