Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your portfolio comprises four investments, with an equal dollar value invested in each. The four investments are 1) the S&P 500 market portfolio, 2) shares

image text in transcribedimage text in transcribed

Your portfolio comprises four investments, with an equal dollar value invested in each. The four investments are 1) the S&P 500 market portfolio, 2) shares of Tesla stock, 3) a General Motors bond, and 4) cash in a bank savings account which pays a guaranteed 0.50% interest this year. The CAPM betas for Tesla stock and the GM bond are 1.97 and 0.60, respectively. What is the beta of your entire portfolio? 0.67 0.89 1.01 1.20 O 1.44 O 1.67 A firm has book value of equity of $333 million. Its market capitalization is $600 million. It has $150 million in debt and $40 million in cash and short-term investments on the balance sheet. Its CAPM beta is 1.4, the yield to maturity on its debt is 5%, the corporate tax rate is 20%, and the required return on its equity is 11%. What is this firm's WACC? 7.7% 8.5% 9.9% 11.8% 12.2%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting for Governmental and Nonprofit Entities

Authors: Jacqueline L. Reck, James E. Rooks, Suzanne Lowensohn, Daniel Neely

18th edition

1260190080, 1260190083, 978-1259917059

Students also viewed these Finance questions