Question 1 (4 Marks)
Richard must decide how to allocate the capital in his portfolio.
Richard has	$49,000	available to invest. He finds the rates of
return for four stocks for the past 12 years and the results are given
below. Richard plans to invest 25% of his funds in each stock.
a) How much will he invest in each stock?
(1 Mark)
b) The expected value of Richard's porfolio is:
(2 Marks)(Round your answer to one one-hundreth of a percent)
c) The standard deviation of Richard's portfolio is:
(1 Mark)(Round your answer to one one-hundredth of a percent)
Year	Stock A (%)	Stock B (%)	Stock C (%)	Stock D (%)
1	-4.460	-14.540	4.560	-1.960
2	9.080	26.080	-6.272	4.810
3	12.880	37.480	-9.312	6.710
4	12.880	37.480	-9.312	6.710
5	-13.160	-40.640	11.520	-6.310
6	16.280	47.680	-12.032	8.410
7	17.080	50.080	-12.672	8.810
8	13.500	39.340	-9.808	7.020
9	8.340	23.860	-5.680	4.440
10	10.080	29.080	-7.072	5.310
11	-5.070	-16.370	5.048	-2.265
12	-5.160	-16.640	5.120	-2.310

Question 1 (4 Marks) Richard must decide how to allocate the capital in his portfolio. Richard has $49,000 available to invest. He finds the rates of return for four stocks for the past 12 years and the results are given below. Richard plans to invest 25% of his funds in each stock. a) How much will he invest in each stock? $ Enter Answer (1 Mark) b) The expected value of Richard's porfolio is: Enter Answer % Enter Answer % (2 Marks)(Round your answer to one one-hundreth of a percent) c) The standard deviation of Richard's portfolio is: (1 Mark)(Round your answer to one one-hundredth of a percent) Year 1 2 3 4 5 6 7 8 9 10 11 12 Stock A (%) -4.460 9.080 12.880 12.880 -13.160 16.280 17.080 13.500 8.340 10.080 -5.070 -5.160 Stock B (%) -14.540 26.080 37.480 37.480 -40.640 47.680 50.080 39.340 23.860 29.080 -16.370 -16.640 Stock C (%) 4.560 -6.272 -9.312 -9.312 11.520 -12.032 -12.672 -9.808 -5.680 -7.072 5.048 5.120 Complete your rough work in the space below Stock D (%) -1.960 4.810 6.710 6.710 -6.310 8.410 8.810 7.020 4.440 5.310 -2.265 -2.310 Enter your Final Answer Here Question 2 (3 Marks) Anna is a Vice President at the J Corporation. The company is considering investing in a new factory and Anna must decide whether it is a feasible project. In order to assess the viability of the project, Anna must first calculate the rate of return that equity holders expect from the company stock. The annual returns for J Corp. and for a market index are given below. Currently, the risk-free rate of return is 1.4% and the market risk-premium is 4.2% a) What is the beta of J Corp.'s stock? (1 Mark)(Round your answer to two decimal places) b) Using the CAPM model, what is the expected rate of return on J Corp. stock for the coming year? (2 Mark)(Round your answer to one one-hundreth of a percent) Year 1 2 3 4 5 6 7 8 9 10 11 12 J Corp. Return (%) -3.76 7.07 10.11 10.11 -10.72 12.83 13.47 10.61 6.48 7.87 -4.25 -4.32 Market Return (%) -4.90 8.64 12.44 12.44 -13.60 15.84 16.64 13.06 7.90 9.64 -5.51 -5.60 Complete your rough work in the space below Question 3 (3 Marks) Refer to Question 2. Now that Anna has determined an appropriate rate of return for J Corp.'s stock, she must calculate the firm's Weighted Average Cost of Capital (WACC). There are currently 51.6 Million J Corp. common shares outstanding. Each share is currently priced at $7.70 . As well, the firm has 6,000 bonds outstanding and each bond has a face value of $10,000, a yield to maturity of 3.64% and a quoted price of $10,164.40 . J Corp.'s tax rate is 30%. J Corp. has no preferred shares outstanding. What is J Corp.'s WACC? (Round your answer to one one-hundredth of a percent) Enter Answer Enter your Final Answer Here Question 4 (5 Marks) Refer to Questions 2 and 3. The land for the factory will cost $290,00 The factory will cost $6,440,000 to build and construction will take two years with construction costs payable in equal installments at the start of each year. The factory will operate for 20 years; however, at the end of the fifth, tenth, and fifteenth year of operation, refurbishment costs will be $440,000 At the end of its 20 year lifespan, the land can be resold for $310 There is a 70% probability that the factory's net operating cash flows will be $675,162 ; however, there is a 30% chance that net cash flows will only . You may assume that net operating cash flows flow at the e $413,362 of each year. a) What are the Expected net operating cash flows per year? (1 Mark)(Round your answer to 2 decimal places) b) What is the Internal Rate of Return for the project? (1 Mark)(Round your answer to one one-hundreth of a percent) c) What is the Net Present Value of the project? (1 Mark)(Round your answer to 2 decimal places) d) Should Anna recommend that the J Corporation build the factory? (2 Marks) Question 5 (5 Marks) 0.00 Refer to Questions 1 and 2. Richard has just received an unexpected bonus at work worth $12,250 and, given the J. Corp.'s reputation for excellent investment decision making, he will invest all of the bonus in J Corp. stock. Given the rates of return for stocks A, B, C, and D presented in Question 1 and the rates of return for J Corp. stock and the market presented in Question 2, as well as the cash amounts he is investing in stocks A, B, C, and D as you determined in Question 1, a) What is the beta of Richard's portfolio? (3 Marks) Enter Answer (round to two decimal points) b) Richard's portfolio is... (2 Marks) } Aggressive Defensive Check o Neithe r Enter your Final Answer Here Complete your rough work in the space below