Investment = $1,250,000

Company 1 Stock Price = $75

EPS = 3; ROE = 0.25; beta = 3; plowback = 0.8; R (f) = 0.04; R (m) = 0.1; MRP = 0.06

Company 2 Stock Price = $155

EPS = 5; ROE = 0.10; beta = 1; plowback = 0.7; R (f) = 0.05; R (m) = 0.08; MRP = 0.03;

Allocation is 78% of the investment to stock with the highest return and 22% into the other.

Question: For company 1 and 2, What is the expected return when margin is 30%, fee is 15%, and the rate on loan is 3% over R(f) ?