Question 1.What is the expected rate of return on a portfolio that has $4,000 invested in Stock A and $6,000 invested in Stock B? The expected rates of return on these two stocks are 13 percent and 9 percent, respectively.

Question2.Alvin C. York, the founder of York Corporation, thinks that the optimal capital structure of his company is 30 percent debt, 15 percent preferred stock, and the rest common equity. If the company is in the 40 percent tax bracket, compute its weighted average cost of capital given that:

YTM of its debt is 10 percent

. New preferred stock will have a market value of $31, a dividend of $2 per share, and flotation costs of $1 per share.

Price of common stock is currently $100 per share, and new common stock can be issued at the same price with flotation costs of $4 per share.

The expected dividend in one year is $4 per share, and the growth rate is 6 percent.Assume the addition to retained earnings for the current period is zero.

Question 3:

Matrix.com has designed a virtual-reality program that is indistinguishable from real life to those experiencing it. The program will cost $20 million to develop (paid up front), but the payoff is substantial: $1 million at the end of year 1, $2 million at the end of year 2, $5 million at the end of year 3, and $6 million at the end of each year thereafter, through year 10.

Matrix.com's weighted average cost of capital is 15 percent. Given these conditions, what are the NPV, IRR of the proposed program?