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Business Finance Portfolio of Stocks

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Could some please show me step by step how to work these 3 problems:

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?

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Solution Summary

The portfolio of stocks for business finance is examined.

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