Objective type questions on calculation of beta and stock

Reference no: EM1316694

Objective type questions on calculation of beta and stock price

1. Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only investments in his portfolio. What is his portfolio's beta?

a) 0.93

b) 0.98

c) 1.03

d) 1.08

e) 1.13

2. A share of common stock has just paid a dividend of $2.00. If the expected long-term growth rate for this stock is 7%, and if investors require a (n) 11% rate of return, what is the price of the stock?

a) $47.50

b) $49.00

c) $50.50

d) $52.00

e) $53.50

3. Brandi Co. has an unlevered beta of 1.10. The firm currently has no debt, but is considering changing its capital structure to be 30% debt and 70% equity. If its corporate tax rate is 40%, what is Brandi's levered beta?

a) 1.2549

b) 1.3829

c) 1.5764

d) 1.6235

e) 1.7458

Reference no: EM1316694

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