I1. Calculation: 1. There are three stocks of A, B, and C. Year B c 30.00% 40.00% -18.00% 20X2 -10.00% 25.00% 33.00% 20X3 30.00% -5.00% 15.00% 20X4 -5.00% -10.00% -5.00% 20X5 12.00% 30.00% 27.00% A What is the expected return and standard deviation of stock A, B, and C. 6 points B What is the correlation of AB and BC, and AC. 3 points C Order your priority for the Portfolios. 1 points)
2. Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e. g= 0. The company's last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. A What is the required return? 2 points) B What is the predicted Dividend at the end of year 5? 2 points C What is the horizon value Terminal value at the end of year 5? 3 points D What is the current price of the common stock? 3 points
3. Considering two mutually exclusive projects and Cash flows are expected as below WACC 8% E Year 0 3 4 5 6 Project A -$10,000 $6,000 $8,000 $5,000 Project B -$15,000 $5,200 $7,000 $6,000 $5,000 $4,000 $3,000 B What are the annual payments (PMT of two projects based on Equivalent annual annuity approach? C). Which project should be accepted?