Hey there! Have some business finance extra credit questions - they are due tonight and I need the EC, but as long as you answer the problem so I can submit early - leave an explanation / formulas used for each problem so I can rework tomorrow.

Thank you for your help

FINC 303 Summer 2017 1. Suppose you are financing a project with 30,000 shares of common stock at $30 each and 800 bonds at $1,000 each. The required return on the stock is 11.2% and the firm has a tax rate of 35%. If the WACC is 8.4%, what is the YTM on the bonds? A. 8.08% B. 10.31% C. 9.12% D. 11.28% 2. Which of the following statements is FALSE regarding capital structure theories? A. The original M&M Proposition I states that the capital structure is irrelevant. B. M&M Prop I with taxes says that Debt is better than Equity because it is cheaper. C. Increasing Debt levels increases the cost of Debt, but does not affect the cost of Equity. D. Debt and Equity levels must ultimately be decided upon together. 3. You have a portfolio that has an expected return of 8.45%. The portfolio moves, on average, exactly half as much as the market at the same time, in the same direction. The current risk-free rate is 2%. Therefore, what is your expected return on the market? A. 14.9% B. 12.5% C. 9.4% D. 7.1% 4. Consider a portfolio made up of the following assets: $240,000 of Stock A, $300,000 of Stock B, and $260,000 of Stock C. Stock A moves twice as much as the market, Stock B moves half as much as the market, Stock C moves exactly as the market. They all move in the same direction. What is the beta of the portfolio? A. .75 B. .87 C. 1.11 D. 2.12 5. Suppose you buy 100 shares of stock that are selling for $18.42 per share. After holding them for three years exactly, you sell them at a price of $19.22 per share. Over the period, the firm paid a dividend of $.25 per share each quarter of the first year, and increased this amount to $.30 and $.35 respectively for the second and third years. Given this, what is your dollar return? A. $319 B. $397 C. $440 D. $487 6. Rank the following in terms of historical riskiness, from safest to riskiest. I. II. III. IV. A. B. C. D. Large Cap Equities Small Cap Equities Long-term Corporate Bonds T-Bills I, III, II, IV IV, III, I, II III, IV, I, IV IV, I, II, III 7. Consider a two-asset portfolio. Stock A has a standard deviation of 29% and Stock B has a standard deviation of 38%. You have $27,000 in Stock A and $31,000 in Stock B. The correlation between Stock A and B is .74. Given this, what is the standard deviation of the portfolio? A. 15.07% B. 22.34% C. 31.63% D. 41.23% 8. The firm has a D/E ratio of 2.4. The firm's tax rate is 35%, while the cost of debt is 8% and the cost of equity is 12%. What is the firm's WACC? A. 4.71% B. 5.86% C. 6.11% D. 7.20% 9. Which of the following statements regarding beta is INCORRECT? A. If a firm has a beta > 1 it is riskier than the market. B. If a firm as a negative beta, it moves in the same direction as the market. C. The firm's beta measures systematic risk. D. Risk is determined by magnitude, not the sign. 10. How can one maximize the value of the firm? A. Minimize WACC B. Maximize Advertising C. Minimize Employees D. Maximize Heartfelt Applause MULTIPLE CHOICE ANSWER SHEET 1.___________ 2.___________ 3.___________ 4.___________ 5.___________ 6.___________ 7.___________ 8.___________ 9.___________ 10.___________ Part II. Problems 1. Suppose exactly three years ago, you invested in the following portfolio: 400 shares of Common Stock A, which continuously pays a dividend of $.60 per share each quarter, and was selling at the time (three years ago) for $64.18 per share. 20 bonds of Coupon Bond B, which carries a coupon rate of 6.4% and face value of $1,000. They were selling for $1,038.34 each. 300 Shares of Preferred Stock C, which carries a Dividend Yield of 4.1% and a face value of $100. They were selling for $75.34 each at the time. Today, the assets are selling at the following: Stock A: $68.47 per share Bond B: $985.11 per share Pfd Stock C: $68.15 per share What is the dollar return on your portfolio over the three year period? What was your total holding period return (HPR) on the portfolio over the three years? 2. You are in charge of obtaining $250,000 worth of funding for a new project your company is considering. You can issue common equity in any of the following amounts: Option 1: 3000 shares at $60 per share Option 2: 2000 shares at $70 per share Option 3: 1500 shares at $80 per share In any case, you will finance the rest with private debt. The cost of the private debt is a function of the amount that you borrow. You are assured in any of the scenarios of borrowing at least $70,000, and at that level, you will have a cost of debt of 6%. For every $10,000 additional debt beyond that, the cost increases by .5%. The cost of the common stock9.1% if you borrow $70,000 (i.e., Option 1), but increases by 1% for Option 2, and another 1% for Option 3. Thecompany's tax rate is 35%. Given this, which of the options above provides the best scenario? WACC: Option 1 WACC: Option 2 WACC: Option 3 Suppose the project is expected to generate NCFs of $75,000 during the first four years and then $50,000 for the fifth and final year. Given this, what is that Net Present Value of the project