Reference no: EM132703616

-Suppose the market risk premium is 5.6% and also that the standard deviation of returns on the market portfolio is 0.21. Further assume that the correlation between the returns on ABC (Google) stock and returns on the market portfolio is 0.8, while the standard deviation of returns on ABC stock is 0.62. Finally assume that the risk-free rate is 2%. Under the CAPM, what is the expected (i.e. required) return on ABC stock? Answer should include four digits to the right of the decimal point.

-You are planning to buy two stocks to create a portfolio. One is the very-stable old-world company Proctor & Gamble (PG). Assume PG's beta equals 0.37. The other stock is high-flying new-world company Tesla (TSLA). Assume TSLA's beta equals 1.49. You will invest an equal amount of money in each stock. What is the beta of your planned portfolio? Answer should include two digits to the right of the decimal point, rounded appropriately.

-You are considering a new project. The initial cost is $165 million. You expect free cash flow (FCFF) of $5million the 1st year, and that this free cash flow will grow by 11.8% over the following 10 years (i.e., g=11.8% for t=2 through t=11). After that, free cash flow is expected to grow at a constant rate of 4.7% forever. Assume a WACC equal to 10%. What is the project's NPV "in millions of dollars"? Answer should include four digits to the right of the decimal point.