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could you help me soleve the finance management problem Suppose that the risk-free rate R_p = 5% and the market premium E(R_M) - R_F =
could you help me soleve the finance management problem
Suppose that the risk-free rate R_p = 5% and the market premium E(R_M) - R_F = 8%. You analyze two stocks A and B and determine that these stocks have annual expected returns such that: E(R_A) = 13% E(R_B) = 21% (a) What are the of the two stocks A and B? (b) Suppose you have $1 million to invest. You invest $400,000 in stock A and $300,000 in stock B. The rest of the money you put into a safe investment that gives you the risk-free rate of return. What is the expected return of your investment portfolio? What is the beta of your investment portfolio? Zeus Inc. has 150 million shares and 850 million in debt outstanding. On the asset side of its balance sheet the firm has $100 million in cash and marketable securities. The firm's business operations are expected to generate earnings of $230 million at the end of the current year. These earnings are expected to grow at 5% per year for the foreseeable future. The firm follows a policy of distributing half of its earnings in the form of dividends and share repurchases each year, while reinvesting the rest. The firm's equity cost of capital is estimated to be 12%. 1. What is your estimate for the market value of Zeus's equity and its stock price? 2. What if the firm's enterprise valueStep by Step Solution
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