Share
Explore BrainMass

Business Finance Portfolio of Stocks

Could some please show me step by step how to work these 3 problems:
(FOR TABLES/QUESTIONS IN FULL, PLEASE SEE ATTACHMENT)

1. You currently own the following portfolio of stocks (table). You are planning to sell $300,000 of stock C and $200,000 of stock A and invest the proceeds in stock D. What would be the portfolio's required rate of return following this change?

2. Bethesda Enterprises has been growing at a 25% annual rate and is expected to continue to do so for 4 more years. At that time, growth is expected to slow to a constant 15% per year rate. The firm maintains a 45% payout ratio, and this year's ending retained earnings (after dividends) were $4 million. The firm's beta is 2.1, the risk-free rate is 4%, and the market risk premium is 9%. The firm has 1,000 bonds outstanding. The bonds are 20 year bonds with a 8.5% semi-annual coupon and a $1,000 par value with an annual yield to maturity of 9.5%. The bond can be called in 7 years at a call price of $1,100. (a) What is the bond's annual yield to call? (b) What is the market value of the firm's common equity, which has 1 million shares outstanding.

3. You have been hired to compute the WACC of Bethesda Family Enterprises using the CAPM (table). What is the WACC of Bethesda Family Enterprises?

Attachments

Solution Summary

The portfolio of stocks for business finance is examined.

$2.19