Please verify that the attached are correct. Thanks!

1. (Expected rate of return and risk) Summerville Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return of each? Stock A Probability Return 0.3 11% 0.4 15% 0.3 19% Expected Return Standard Deviation Stock B Expected Return Probability Return Expected Return 3.30% 0.2 -5% -1.00% 6.00% 0.3 6% 1.80% 5.70% 0.3 14% 4.20% 0.2 22% 4.40% 15.00% Expected Return 9.40% 3.0984% Standard Deviation 9.11% Since expected return is higher and risk (measured from the standard deviation) of Stock A is lower than Stock B, the investor should choose stock A. 2. (Capital asset pricing model) The expected return for the general market is 12.8 percent, and the risk premium in the market is 9.3%. Tasaco, LBM, and Exxos have betas of 0.864, 0.693 and 0.575, respectively. What are the corresponding required rates of return for the three securities? Tasaco LBM Exxos 9.3% 9.3% 9.3% Risk free rate 0.864 0.693 0.575 Security 12.8% 12.8% 12.8% Expected market return 20.84% 19.24% 18.15% Required rates of return 3. (Break-even analysis) You have developed the following income statement for the Hugo Boss Corporation It represents the most recent year's operations, which ended yesterday. Sales Variable cost Revenue before fixed costs Fixed costs EBIT Interest expense Earnings before taxes Taxes at 50% Net income $50,439,375 (25,137,000) $25,302,375 (10,143,000) $15,159,375 (1,488,375) $13,671,000 (6,835,500) $6,835,500 Your supervisor in the controller's office has just handed you a memorandum asking for written responses to the following questions: What is the firm's break-even point in sales dollars? a. Total Contribution Margin =Sales - Variable costs $25,302,375 Contribution Margin Ratio = Total Contribution Margin / Sales 0.5016 Break-even Point in Sales $ = Fixed Expenses/Contribution Margin Ratio $20,219,705.88 b. If sales should increase by 30%, by what percent would earnings before taxes (and net income) increase? If Sales Increase by 30%, Variable cost will also increase by 30%, earnings before taxes (and net income) increase will increase by 55.52% as shown below Sales Variable cost Revenue before fixed costs Fixed costs EBIT Interest expense Earnings before taxes Taxes at 50% Net income $50,439,375 (25,137,000.00) $25,302,375 (10,143,000.00) $15,159,375 (1,488,375.00) $13,671,000 (6,835,500.00) $6,835,500 Percentage of earning before taxes $65,571,187.50 (32,678,100.00) $32,893,087.50 (10,143,000.00) $22,750,087.50 (1,488,375.00) $21,261,712.50 10,630,856.25 $10,630,856.25 55.52% es? below % Increase 1. (Expected rate of return and risk) Summerville Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return of each? Stock A Probability Return 0.3 11% 0.4 15% 0.3 19% Expected Return Standard Deviation Stock B Expected Return Probability Return 3.30% 0.2 -5% 6.00% 0.3 6% 5.70% 0.3 14% 0.2 22% 15.00% Expected Return 3.0984% Standard Deviation Expected Return -1.00% 1.80% 4.20% 4.40% 9.40% 9.11% Since expected return is higher and risk (measured from the standard deviation) of Stock A is lower than Stock B, the investor should choose stock A. 2. (Capital asset pricing model) The expected return for the general market is 12.8 percent, and the risk premium in the market is 9.3%. Tasaco, LBM, and Exxos have betas of 0.864, 0.693 and 0.575, respectively. What are the corresponding required rates of return for the three securities? Tasaco LBM Exxos Tasaco LBM Exxos 9.3% 9.3% 9.3% 3.5% 3.5% 3.5% Risk free rate Risk free rate 0.864 0.693 0.575 0.864 0.693 0.575 Security Security Beta 12.8% 12.8% 12.8% 12.8% 12.8% 12.8% Expected market return Expected market return 20.84% 19.24% 18.15% 8.85% Required rates of return Required rates of return 11.54% 9.94% 3. (Break-even analysis) You have developed the following income statement for the Hugo Boss Corporation It represents the most recent year's operations, which ended yesterday. Sales Variable cost Revenue before fixed costs Fixed costs EBIT Interest expense Earnings before taxes Taxes at 50% Net income $50,439,375 (25,137,000) $25,302,375 (10,143,000) $15,159,375 (1,488,375) $13,671,000 (6,835,500) $6,835,500 Your supervisor in the controller's office has just handed you a memorandum asking for written responses to the following questions: What is the firm's break-even point in sales dollars? a. Total Contribution Margin =Sales - Variable costs $25,302,375 Contribution Margin Ratio = Total Contribution Margin / Sales 0.5016 Break-even Point in Sales $ = Fixed Expenses/Contribution Margin Ratio $20,219,705.88 b. If sales should increase by 30%, by what percent would earnings before taxes (and net income) increase? If Sales Increase by 30%, Variable cost will also increase by 30%, earnings before taxes (and net income) increase will increase by 55.52% as shown below % Sales Variable cost Revenue before fixed costs Fixed costs EBIT Interest expense Earnings before taxes Taxes at 50% Net income $50,439,375 (25,137,000.00) $25,302,375 (10,143,000.00) $15,159,375 (1,488,375.00) $13,671,000 (6,835,500.00) $6,835,500 Percentage of earning before taxes $65,571,187.50 (32,678,100.00) $32,893,087.50 (10,143,000.00) $22,750,087.50 (1,488,375.00) $21,261,712.50 10,630,856.25 $10,630,856.25 55.52% % Increase