Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return A 8.86% B C 10.78 13.18 Standard Deviation 15% 15 15 Beta 0.7 1.1 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. X Open spreadsheet a. What is the market risk premium (rM TRF)? Round your answer to two decimal places. b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. Sales/Total assets 3.0 Net income/Sales % 1.2% Net income/Total assets % 3.6% Net income/Common equity % 9.0% Total debt/Total assets % 10.0% Total liabilities/Total assets % 60.0% b. Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Round your answers to two decimal places. For the firm, ROE is %. For the industry, ROE is %. c. Outline Lozano's strengths and weaknesses as revealed by your analysis. The firm's days sales outstanding is more than twice as long as the industry average, indicating that the firm should -Select- credit or enforce a -Select- stringent collection policy. The total assets turnover ratio is well -Select- the industry average so sales should be decreased, assets -Select- both. While the company's profit margin is -Select- the industry - net income should be -Select- or than the industry average, its other profitability ratios are -Select- compared to given the amount of equity and assets. Icon Key Problem 7-13 (Comprehensive Ratio Analysis) Save Check My Work (1 remaining) Question 7 of 7 Submit Assignment for Grading