5. (TCOs 3 and 5) You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio? (Show your work.)
6. (TCO 3) A stock has a beta of 1.05, the expected return on the market is 12 percent, and the risk-free rate is 4 percent. What must the expected return on this stock be? (Show your work.)
7. (TCO 4) Suppose Pat, Ltd. just issued a dividend of $2.40 per share on its common stock. The company’s dividends have been growing at a rate of 5%. If the stock currently sells for $80.00, what is your best estimate of the company’s cost of equity? (Show your work.)
8. (TCO 4) Given the following information, calculate the weighted average cost for the Ban Corp.
Percent of capital structure:
Preferred stock 10%
Common equity 70%
Corporate tax rate 34%
Dividend, preferred $8.00
Dividend, expected common $4.00
Price, preferred $80.00
Growth rate 5%
Bond yield 7%
Price, common $80.00 (Points : 40)
9. (TCO 7) What are some important factors to consider when conducting a credit evaluation and scoring?
10. (TCO 1) Explain the concept of the stakeholder in contemporary finance.
11. (TCO 6) What is the difference between diversifiable and non-diversifiable risk? Give examples of each.
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