I am having trouble figuring out how to solve the problem #'s 9 and 10 below. I need tutoring assistance.

Subject: Corporate Finance

Topics: Investor Behavior and Capital Market Efficiency

1 Issue Found: "The wording of this question may indicate that you intend to submit a tutor's work as your own. Please revise accordingly."

Response: This is NOT my intention of submitting a tutor's work. I literally need help in solving the problems below. For problem number 9, after I calculate the market value for each firm with the formula: Market Value = Dividend / Cost of Capital.

How do I solve for the "expected return of a self-financing portfolio" for part b. (both parts of b.) and part c?

In addition, after solving for parts b. and part c., how do I solve for dividend yield (part d.)? The formula from my text book is Div 1 / P0. Div 1 = Dividend 1; P0 = current market price for share. I can not solve for dividend yield due to not having the current market price (P0). Two part question: (1) How do I solve for dividend yield in order to rank the firms by dividend yield? (2) How do I solve for expected return of a self-financing portfolio for part d. based on dividend yield?

For number 10. Two part questions: (1) What is the formula in order to calculate expected return for each stock (Stock A - D) (part a.)? (2) How do I solve for part b.?

Please help. Problem numbers 9 and 10 are below.

9. Each of the six firms in the table below is expected to pay the listed dividend payment every year in perpetuity:

FirmDividend ($ million)Cost of Capital (% / year)

S19.88.4

S29.812.9

S39.814.8

B198.08.4

B298.012.9

B398.014.8

a.Using the cost of capital in the table:

Firm S1 market value is $__________ million. (Round to one decimal place.)

Firm S2 market value is $__________ million. (Round to one decimal place.)

Firm S3 market value is $__________ million. (Round to one decimal place.)

Firm B1 market value is $__________ million. (Round to one decimal place.)

Firm B2 market value is $__________ million. (Round to one decimal place.)

Firm B3 market value is $__________ million. (Round to one decimal place.)

b.Rank the three S firms by their market values. For a self-financing portfolio that went long on the firm with the largest market value and shorted the firm with the lowest market value, the expected return of a self-financing portfolio is __________%. (Round to one decimal place.)

Repeat with the B firms. The expected return of a self-financing portfolio is __________%. (Round to one decimal place.)

c.Rank all six firms by their market values. For a self-financing portfolio that went long on the firm with the largest market value and shorted the firm with the lowest market value, the expected return of a self-financing portfolio is __________%. (Round to one decimal place.)

d.Repeat part (c) but rank the firms by the dividend yield instead of the market value. The expected return of a self-financing portfolio is __________%. (Round to one decimal place.)

10. Consider the following stocks, all of which will pay a liquidating dividend in a year and nothing in the interim:

Expected

MarketLiquidating

CapitalizationDividend

($ million)($ million)Beta

Stock A9081,0000.74

Stock B8401,0001.54

Stock C8411,0001.37

Stock D8791,0000.76

a.Calculate the expected return for each stock.

The expected return of Stock A is __________%. (Round to two decimal places.)

The expected return of Stock B is __________%. (Round to two decimal places.)

The expected return of Stock C is __________%. (Round to two decimal places.)

The expected return of Stock D is __________%. (Round to two decimal places.)

b. The correlation between the expected return and market capitalization of the stocks is __________. (Round to five decimal places.)